Abstract
This article offers a comprehensive analysis of the interplay between enforceable environmental trade provisions and exports between 1995 and 2021. Employing a Poisson pseudo maximum likelihood model, this research article carries a series of analyses with the aim of dissecting the impact of enforceable environmental trade provisions on the volume and composition of exports under different conditions. The analysis focuses primarily on the design of enforceable environmental trade provisions by looking at three distinct designs—dispute settlement mechanisms, domestic obligation enforcement and broad enforcement encompassing both—demonstrating how different designs behave under different trade dynamics. While enforceability shows no effect on green or total exports, or on dirty exports at the aggregate level, the impact emerges once trade is disaggregated by income level and trade direction. For high-income exporters, all three designs reduce dirty exports, whereas for low-income exporters, only broad enforcement is effective. Examining trade between high- and low-income economies further reveals that dispute settlement mechanisms and broad enforcement reduce dirty exports in both directions, while domestic obligations operate only from high- to low-income partners. These findings demonstrate that the reduction in dirty exports depends critically on how enforcement is designed and on the institutional context of the trading partners. Finally, the study proposes a series of policies for the optimal use of enforceable environmental trade provisions to maximise their impact.
JEL Codes:
F18, Q56, O13, F14