Environmental Goods Trade and Environmental Sustainability: Exploration of the Effect of Greenhouse Emissions in Europe

This study examines the influence of trade in environmental goods on environmental sustainability, with a particular emphasis on the impact of greenhouse gas emissions in Europe. Utilising annual data from 59 European countries over the period 1994–2024, the research incorporates environmental sustainability indicators sourced from the World Development Indicators (WDI, 2022) and trade data from the International Monetary Fund (IMF, 2024). The analysis employs second-generation econometric techniques to address cross-sectional dependence and heterogeneity, including Pesaran’s (2004, 2015) tests, Westerlund’s (2007) cointegration approach, and the Augmented Anderson-Hsiao (AAH) estimator as proposed by Chudik and Pesaran (2022). Empirical findings indicate a significant long-term cointegration between trade in environmental goods and greenhouse gas emissions. Specifically, exports of environmental goods and total trade in these goods contribute to the reduction of emissions, whereas energy consumption continues to be a primary driver of environmental degradation. Additionally, the import of environmental goods shows a weak but negative relationship with greenhouse emissions, suggesting that imported environmental technologies may enhance production efficiency. The study further concludes that trade in environmental goods is pivotal in achieving environmental sustainability across European economies by fostering cleaner production and innovation-driven growth. Consequently, policies that promote the expansion of green trade, reduce trade barriers on environmental goods, and encourage the use of renewable energy are essential to bolstering Europe’s environmental resilience. Moreover, advancing research and development in clean technologies, harmonising regional carbon standards, and incentivizing sustainable production practices will facilitate Europe’s transition toward a low-carbon economy.

Environmental goods trade, environmental sustainability, greenhouse gas emissions

1. Abdulkareem, A., Ojonugwa, U., George, O., & Samuel, A. (2020). Trade and environmental quality: Evidence from dynamic panel models. EnvironmentalEconomics and Policy Studies, 22(4), 689–708. https://doi.org/10.1007/s10018019-00267-9 [Google Scholar] [Crossref]

2. Alhassan, A. (2022). Trade in environmental goods and environmental sustainability:Evidence from Asia. Environmental Science and Pollution Research, 29(17), 25763–25778. https://doi.org/10.1007/s11356-021-17764-z [Google Scholar] [Crossref]

3. Ali, H. S., Adamu, P., & Ishaq, M. (2016). The impact of trade on environmental quality in Nigeria. Journal of Economics and Sustainable Development, 7(4), 75–83. [Google Scholar] [Crossref]

4. Alola, A. A., Yalçiner, K., & Alola, U. V. (2019b). The role of renewable energy, immigration, and real income in environmental sustainability target. Science of the Total Environment, 697, 134082. https://doi.org/10.1016/j.scitotenv.2019.134082 [Google Scholar] [Crossref]

5. Appiah, M. O., Frimpong, S., & Asare, B. (2022). The impact of trade on environmental pollution in emerging markets: A panel analysis. Environmental Economics, 13(1), 45–59. https://doi.org/10.21511/ee.13(1).2022.05 [Google Scholar] [Crossref]

6. Baltagi, B. H., Feng, Q., & Kao, C. (2012). A Lagrange Multiplier test for cross-sectional dependence in a fixed effects panel data model. Journal of Econometrics, 170(1), 164–177. https://doi.org/10.1016/j.jeconom.2012.04.004. [Google Scholar] [Crossref]

7. Burki, S. A., & Tahir, M. (2022). Determinants of environmental pollution in Asian economies: Evidence from panel data techniques. Environmental Science and Pollution Research, 29(11), 15984–15998. https://doi.org/10.1007/s11356-021 16653-6 [Google Scholar] [Crossref]

8. Can, M., Dogan, E., & Seker, F. (2020). The role of trade diversification and margins in environmental quality in developing countries. Environmental Science and Pollution Research, 27(22), 28050–28067. https://doi.org/10.1007/s11356-020 09012-3 [Google Scholar] [Crossref]

9. Charfeddine, L. (2017). The impact of energy consumption and economic development on ecological footprint and CO₂ emissions: Evidence from a panel of Middle Eastern countries. Energy, 149, 1019–1028. https://doi.org/10.1016/j.energy.2017.02.069 [Google Scholar] [Crossref]

10. Chudik, A., & Pesaran, M. H. (2022). Large panel data models with cross-sectional dependence: A survey. Oxford Research Encyclopedia of Economics and Finance. https://doi.org/10.1093/acrefore/9780190625979.013.656. [Google Scholar] [Crossref]

11. Cosmas, N., Lin, B., & Nathaniel, S. (2019). The nexus between environmental goods trade and environmental performance: Evidence from developing countries. Environmental Science and Pollution Research, 26(17), 17345–17358. [Google Scholar] [Crossref]

12. Dogan, E., Taspinar, N., & Gokmenoglu, K. K. (2019). Determinants of ecological footprint in MINT countries. Energy & Environment, 30(6), 1065–1086. https://doi.org/10.1177/0958305X19834259 [Google Scholar] [Crossref]

13. Duodu, E., & Mpuure, B. (2023). International trade and environmental pollution in sub Saharan Africa: Evidence from GMM estimation. Journal of Environmental Management, 328, 116944. https://doi.org/10.1016/j.jenvman.2022.116944 [Google Scholar] [Crossref]

14. Ekins, P., Pollitt, H., Barton, J., & Blobel, D. (2019). The role of environmental goods and services in the transition to a green economy. Ecological Economics, 161, 157–166. https://doi.org/10.1016/j.ecolecon.2019.03.003 [Google Scholar] [Crossref]

15. European Commission. (2020). The European Green Deal. European Union. https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal [Google Scholar] [Crossref]

16. Gengenbach, C., Urbain, J. P., & Westerlund, J. (2015). Error correction testing in panels with common stochastic trends. Journal of Applied Econometrics, 31(6), 982 1004. https://doi.org/10.1002/jae.2458. [Google Scholar] [Crossref]

17. Hassan, S. T., Xia, E., & Khan, N. H. (2019). Trade openness, environmental degradation, and energy consumption: Evidence from European countries. Environmental Science and Pollution Research, 26(18), 18832–18843. https://doi.org/10.1007/s11356-019-05375-3 [Google Scholar] [Crossref]

18. Iheonu, C. O. (2021). International trade and environmental sustainability in Africa: Evidence from heterogeneous panel models. Environmental Science and Pollution Research, 28(17), 21496–21509. https://doi.org/10.1007/s11356-020-12156-1 [Google Scholar] [Crossref]

19. Intergovernmental Panel on Climate Change (IPCC). (2020). Climate Change 2020: The Physical Science Basis. Cambridge University Press. https://www.ipcc.ch/report/ar6/wg1 [Google Scholar] [Crossref]

20. International Monetary Fund (IMF). (2024). Direction of Trade Statistics (DOTS). IMF Data Portal. https://data.imf.org. [Google Scholar] [Crossref]

21. Kalamova, M., Johnstone, N., & Haščič, I. (2019). Implications of environmental policy and innovation for environmental goods trade. OECD Environment Working Papers, No. 94. https://doi.org/10.1787/5js1qfzdqk0t-en [Google Scholar] [Crossref]

22. Lin, B., & Zhu, J. (2015). The role of energy trade in environmental performance: Evidence from OECD countries. Renewable and Sustainable Energy Reviews, 52, 1380–1390. https://doi.org/10.1016/j.rser.2015.07.169 [Google Scholar] [Crossref]

23. Liu, Y., Zhang, Y., & Chen, H. (2022). Imports of environmental goods and pollution abatement: Evidence from China. Journal of Cleaner Production, 362, 132294. https://doi.org/10.1016/j.jclepro.2022.132294 [Google Scholar] [Crossref]

24. Ma, X., & Wang, Z. (2021). International trade and environmental pollution: Evidence from 179 countries. Environmental Research, 197, 111120. https://doi.org/10.1016/j.envres.2021.111120 [Google Scholar] [Crossref]

25. Mayer, J., Soete, L., & Kamp, L. (2019). Green innovation and international trade: The role of environmental goods. Journal of Cleaner Production, 239, 118108. https://doi.org/10.1016/j.jclepro.2019.118108 [Google Scholar] [Crossref]

26. Nathaniel, S. P., Anyanwu, O., & Shah, M. (2020). Renewable energy, urbanization, and ecological footprint in the Middle East and North Africa region. Environmental Science and Pollution Research, 27(12), 14601–14613. https://doi.org/10.1007/s11356-020-08017-9 [Google Scholar] [Crossref]

27. Okelele, A., Okafor, L. E., & Nwosu, E. O. (2022). Trade openness and ecological footprint in sub-Saharan Africa: Evidence from dynamic panel data. EnvironmentalChallenges, 7, 100456. https://doi.org/10.1016/j.envc.2022.100456 [Google Scholar] [Crossref]

28. Organisation for Economic Co-operation and Development (OECD). (2019). Trade in environmental goods and services: Opportunities and challenges. OECD Publishing. https://doi.org/10.1787/26176518 [Google Scholar] [Crossref]

29. Pesaran, M. H. (2004). General diagnostic tests for cross-section dependence in panels. CESifo Working Paper Series No. 1229. https://doi.org/10.2139/ssrn.572504. [Google Scholar] [Crossref]

30. Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22(2), 265–312. https://doi.org/10.1002/jae.951. [Google Scholar] [Crossref]

31. Pesaran, M. H. (2015). Testing weak cross-sectional dependence in large panels. Econometric Reviews, 34(6–10), 1089–1117. https://doi.org/10.1080/07474938.2014.956623. [Google Scholar] [Crossref]

32. Rafindadi, A. A. (2016). Does the level of energy intensity matter in the relationship between energy consumption and economic growth? Evidence from Germany. International Journal of Energy Economics and Policy, 6(2), 243–250. [Google Scholar] [Crossref]

33. Rafique, M., Shaheen, M., & Khan, M. I. (2022). Economic complexity, renewable energy, and environmental sustainability in Asian economies. Environmental Science and Pollution Research, 29(34), 50913–50927. https://doi.org/10.1007/s11356-022-20905-5. [Google Scholar] [Crossref]

34. United Nations Environment Programme (UNEP). (2020). Global Environment Outlook 6: Healthy Planet, Healthy People. Cambridge University Press. [Google Scholar] [Crossref]

35. Usman, J. M., Abdulkareem A., Shuaibu S, S., & Abubakar H., (2025) Asymmetric impact of Exchange Rate Instability on Foreign Direct Investment in some selected African Countries. International Journal of Business Economics & Management Science (IJBEMS), 8 (7). E-ISSN 3026-9350 P-ISSN 3027-1843. [Google Scholar] [Crossref]

36. Wang, Z., & Dong, K. (2019). What drives environmental degradation? Evidence from 14 sub-Saharan African countries. Science of the Total Environment, 656, 165–173. https://doi.org/10.1016/j.scitotenv.2018.11.354 [Google Scholar] [Crossref]

37. Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69(6), 709–748. https://doi.org/10.1111/j.1468 0084.2007.00477.x. [Google Scholar] [Crossref]

38. World Bank. (2022). World Development Indicators (WDI). The World Bank. https://databank.worldbank.org/source/world-development-indicators. [Google Scholar] [Crossref]

39. World Commission on Environment and Development (WCED). (1987). Our Common Future. Oxford University Press. [Google Scholar] [Crossref]

40. World Health Organization (WHO). (2018). Air pollution and child health: Prescribing clean air. WHO Press. https://www.who.int/publications/i/item/air-pollution-and child-health [Google Scholar] [Crossref]

41. Yao, X., Ivanovski, K., Inekwe, J., & Smyth, R. (2020). Energy consumption and economic growth: New evidence from meta-analysis. Energy Economics, 86, 104680. https://doi.org/10.1016/j.eneco.2019.104680 [Google Scholar] [Crossref]

42. Zhou, X., Zhang, M., & Zhou, M. (2020). The impact of environmental goods trade on CO₂ emissions: Evidence from OECD countries. Environmental Science and Pollution Research, 27(4), 4075–4088. https://doi.org/10.1007/s11356-019 06902-7. [Google Scholar] [Crossref]

• Financial Development, Foreign Direct Investment and Economic Productivity Nexus in Nigeria
• Symbolic Regression for Approximating Analytic Solutions to Differential Equations
• Micro-Credentials in TVET: An Analysis of Trainers’ Perceptions, Challenges, and Benefits in Bridging Skill Gaps in Tertiary Education
• Moneyge It: A Mobile Application for Shared Expense Tracking
• Revisiting the Inflation–Growth Nexus: Evidence from Malaysia Using OLS Estimation