Trade values in environmental commodities and environment performance: insights from global database

PurposeThe article is the first attempt to investigate the association between the size of trade values in environmental commodities (TVEC) and environmental quality (EQ).Design/methodology/approachThe authors employ two dimensions, including human health’s and ecosystem’s protection, to capture the environmental performance. The six-digit level of the 2007 version of the Harmonized System was used to extract data on commerce in the Combined List of Environmental Goods (CLEG) goods from the UN Comtrade database (HS 2007). The authors apply the formal empirical estimation procedure to a global sample of 28 low-income and lower-middle-income (LI&LMICs) and 19 upper-middle-income (UMICs) and 31 high-income (HICs) during the 2000–2019 period.FindingsThe estimates indicate that the size of TVEC has a favorable impact on QE. The authors find robust results by utilizing various econometric techniques and various measures of TVEC. To shed light on the TVEC-QE nexus, the authors demonstrate the short-run and long-run effects of TVEC on QE and compare the influence of TVEC on QE in the subsamples based on a country’s income level. The results suggest that the TVEC-QE linkage is more likely to exist either in the long-run or high-income economies. Notably, the authors find that the influences of TVEC become more pronounced in a country characterized by a well-developed institutional system.Practical implicationsGovernments should develop a more efficient policy framework to improve the relationship between trading activities and environmental performance. There has been a substantial increase in the global demands and requirements for environmental commodities, and the authors also realize the world economy has become greener and fairer. Therefore, it is vital for both developing and developed countries to catch this trend and satisfy the global demands and requirements to survive in foreign markets.Originality/valueThe article is the first attempt to investigate the association between trade values of environmental goods and environmental innovation.