The dynamic impact of trade on environment

Abstract

Utilizing long-term and high-resolution pollution remote sensing data, this study examines the dynamic impact of export expansion on the local environment in China from 2000 to 2020. Regions facing larger export expansion experience more pronounced initial deterioration in local air quality, while followed by a more prominent subsequent environmental improvement, indicating that the environmental impact of trade varies over time. Further analysis reveals that a key driver behind this dynamic change is the adjustment in environmental policies, particularly when local government faces higher pressure in achieving the environmental goals and when the central government takes over environmental monitoring powers. Additionally, under more stringent environmental regulations, regional export growth leads to increased environmental expenditures, concurrently driving localities to reduce heavily polluting engergy inputs such as coal. Our study suggests that environmental policies can facilitate the synergistic development of trade and the environment.