Rising climate risks in emerging economies challenge the effectiveness of trade and financial mechanisms in supporting green transformation. This study examines how green finance mediates the relationship between green trade and ecological sustainability.
Utilizing panel data from 2000 to 2022 for Emerging and Growth-Leading Economies and grounded in ecological modernization theory, the analysis applies high-dimensional fixed effects as the baseline estimator. Robustness is confirmed through alternative model specifications, while endogeneity and selection bias are addressed using a two-step system generalized method of moments and propensity score matching.
The empirical findings reveal that green trade reduces ecological footprints, which indicates that promoting green trade can accelerate the adoption of clean technologies and resource-efficient production in emerging economies. Moreover, green finance mediates and strengthens the ecological benefits of green trade, suggesting that well-structured green financial systems enhance the capacity of trade to drive ecological sustainability and support low-carbon development pathways. The results remain robust after accounting for endogeneity and selection bias.
The evidence highlights the importance of integrating green trade policies with effective green financial frameworks to accelerate ecological sustainability and support sustainable low-carbon development in emerging economies.
This research contributes to the literature by bridging the gap in understanding the ecological impacts of trade in emerging economies. It demonstrates that green trade supports ecological sustainability while green finance acts as a critical channel that strengthens and scales the environmental benefits of trade.
