Exports of technologically related environmental goods are associated with higher environmental performance in OECD countries

Abstract

In this study, the impact of trade in technologically related environmental goods on environmental quality in OECD countries is examined for the period 2000–2023 using the MMQR method. To further address potential reverse causality concerns, the empirical analysis is complemented by the Dumitrescu–Hurlin panel Granger causality test. The study highlights how trade in these goods promotes the diffusion of environmentally friendly technologies, thereby supporting sustainable energy transitions and improvements in environmental performance. Empirical findings show that exports of technologically related environmental goods have a positive and significant impact across all quantiles, indicating that exports contribute consistently to technology diffusion. In contrast, the effect of imports becomes significant only in countries with relatively high environmental performance levels. The Dumitrescu–Hurlin test results further indicate a unidirectional predictive relationship running from both exports and imports of technologically related environmental goods to environmental performance, while no statistically significant feedback from environmental performance to trade variables is detected. The results further reveal that economic growth initially harms environmental quality, but as development progresses, its effect turns positive, confirming the Environmental Kuznets Curve (EKC) hypothesis. Renewable energy consumption provides limited short-term support for environmental performance, whereas urbanization generally exerts positive effects. Overall, the findings suggest that sustainable development policies should be tailored to country-specific structural characteristics. To maximize the benefits of trade in technologically related environmental goods, it is recommended that countries prioritize tax incentives encouraging the export of environmentally friendly products and invest in infrastructure that facilitates the effective domestic use of imported environmental technologies.