Global energy transition and foreign environmental regulations: Impacts on Russian regions' export volumes

This paper analyses the impacts of trading partners' environmental regulation on the export volumes of the Russian regions, using panel data covering about 140,000 observations in 84 Russian regions and 204 countries for the period 2013-2020. We employ the Gravity Model of international trade and Heckman Sample Selection methodology, with the fixed effects and random effects Poisson Pseudo-Maximum Likelihood techniques to analyse two subsamples of the Russian regions with different shares of environmentally sensitive goods in regional exports. As a robustness check, we utilize the non-parametric Driscoll-Kraay approach. The results of the econometric estimation demonstrate that environmental regulations enhance the export of regions with a high share of environmentally sensitive goods in export structure, while for the rest of the regions the environmental regulations negatively affect export volumes. The promoting effect is associated with a higher level of innovativeness of the regions and the role of the global energy transition process. We conclude that the environmental agenda is a challenge for some Russian regional exporters due to the lack of own environmental regulation, and to the specific features of the commodity and geographic structure of exports. To transform the negative impact into the positive one for all Russian regions, policy measures are necessary on the federal, regional, and company levels, encompassing environmental regulations and green development strategies, along with innovation and cluster policies, and the development of human capital and infrastructure.