Unveiling green trade-led EKC framework: A comprehensive analysis using carbon, material, and ecological footprints...

Achieving environmental sustainability remains a critical global challenge, with unsustainable consumption and production practices, where green trade can play a pivotal role in addressing this issue. The present study is a pioneering attempt to examine the non-linear relationship between green trade and environmental quality among G20 countries within the trade-led EKC framework, evaluating three critical environmental quality indicators, including carbon, material, and ecological footprints, over the period 1990-2023. The study employs robust panel econometric techniques, including Feasible Generalized Least Squares (FGLS), Fully Modified Ordinary Least Squares (FMOLS), and the Dynamic Ordinary Least Squares (DOLS), complemented by rigorous diagnostic tests to address cross-sectional dependence, heterogeneity, stationarity, and cointegration. The results confirm an inverted N-shaped EKC for carbon and ecological footprints, while an N-shaped relationship for material footprint, suggesting more complex green trade-environment interactions. The estimated turning points are $25.22 billion and $43.67 billion for the carbon footprint, $2.50 billion and $47.51 billion for the material footprint, and $13.97 billion and $30.34 billion for the ecological footprint. Among G20 nations, Germany, China, and the USA emerge as leaders across the models, surpassing the turning points of EKC, whereas France, Italy, and the UK are positioned near the turning point that can act as benchmarks for optimizing green trade to achieve low emissions targets. Additionally, the result supports the Pollution Haven Hypothesis, indicating that FDI has accelerated environmental degradation in G20 nations. Moreover, the Granger causality tests unveil significant bidirectional relationships between green trade and different footprint indicators, which suggests that trade and environmental outcomes reinforce each other. These nuanced findings underline the crucial need for targeted, stage-specific policy measures promoting green innovation, technology transfer, and circular economy practices to harness the long-term sustainability potential of green trade effectively.