How Biotrade Openness Shrinks the Ecological Footprint

Boris Stomps, Muhlis Can and Jan Brusselaers

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the environmental implications of biotrade openness, defined as the trade of biodiversity-based products as a share of GDP, within OECD countries between 2010 and 2022. Drawing on the Environmental Kuznets Curve (EKC) and trade–environment nexus frameworks, the research aims to assess whether biotrade contributes to ecological sustainability in trade by reducing the ecological footprint. To address this objective, we construct a panel dataset for 37 OECD economies and apply a suite of advanced econometric techniques. These include cross-sectionally augmented IPS (CIPS) unit root tests, Westerlund cointegration tests, method of moments quantile regression (MMQR), fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), and Dumitrescu-Hurlin panel causality tests. The ecological footprint, sourced from the Global Footprint Network, serves as the primary indicator of environmental pressure. Empirical findings confirm the presence of an EKC relationship: economic growth initially increases ecological footprint, but after a threshold, further growth leads to environmental improvements. Most notably, biotrade openness exerts a consistent and statistically significant negative effect on the ecological footprint. This suggests that expanding biodiversity-based trade reduces environmental stress. These results have important policy implications. For OECD countries, promoting biotrade appears to be a viable strategy for aligning economic growth with environmental sustainability. The findings also support the integration of biotrade into environmental policy frameworks, trade agreements, and biodiversity conservation strategies. Policymakers should further incentivize sustainable supply chains and verify compliance with BioTrade principles to fully realize environmental gains.

Keywords: Biotrade Openness; Trade; Ecological Footprint; Biodiversity; OECD; EKC; Quantile Regression; Sustainability. (search for similar items in EconPapers)
JEL-codes: O1 O11 O13 Q5 Q50 Q56 (search for similar items in EconPapers)
Date: 2024-06-01, Revised 2024-06-01
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