The Energy Threshold of Sustainable Trade: How Renewable Energy Adoption Unlocks GTFP in OECD Nations

The global energy transition has fundamentally reshaped the conditions under which green trade generates sustainable productivity gains. This study investigates whether renewable energy adoption mediates the relationship between green trade export (GTE) and green total factor productivity (GTFP) across 37 OECD economies over 2003–2023. Employing two-way fixed-effects panel regression, dynamic System-GMM estimation, and Hansen’s panel threshold regression with 500 bootstrap iterations, we identify a nonlinear, inverted-N-shaped relationship between GTE and GTFP. Sequential threshold testing reveals a statistically significant double threshold structure: a first clean energy threshold at approximately 8.72% of total final energy consumption and a second threshold at approximately 24.63%, yielding three distinct productivity regimes. Below the first threshold, green trade suppresses GTFP through pollution displacement and insufficient absorptive capacity; between thresholds, green trade exerts a significant positive productivity effect driven by clean technology diffusion and innovation spillovers; above the second threshold, the positive effect moderates, consistent with diminishing returns to green technology absorption. Heterogeneity analysis reveals that early-stage energy transitioners bear disproportionately larger productivity penalties, while advanced transitioners capture stronger above-threshold gains. These findings underscore that trade liberalization alone is insufficient—sustainable productivity growth requires concurrent and targeted investment in renewable energy infrastructure under the post-Paris Agreement framework. Policy implications are presented as evidence-consistent hypotheses, acknowledging that the observational panel framework precludes definitive causal claims pending corroboration from quasi-experimental designs.