How does green trade affect the environment? Evidence from China

Abstract

This paper focuses on the impact of trade in environmentally sound technologies (green trade) on the environment. Using a panel of 277 Chinese cities from 2004 to 2013 and the instrumental variables (IV) strategy, we find that green trade can decrease the pollution level, though total trade openness is far less favorable to the environment. We also find that green imports and green exports are both conducive to the Chinese environment while green ordinary trade performs better than green processing trade. Nevertheless, the effects of green trade are restricted by a city’s purchasing power and absorptive capacity as well as the classifications of environmental goods. Further, green trade mainly improves the local green technological innovation to benefit the environment.