Determinants of the Green Trade Transition in OECD Countries: Evidence from Dynamic Panel Models

Our study addresses a critical gap in the trade–environment literature by introducing Green Trade Transition (GTT), defined as the share of green goods trade in total trade, and investigating its determinants across OECD countries between 2000 and 2020. Using the Generalized Method of Moments (GMM) methodology to address unobserved heterogeneity and endogeneity, we analyze the roles of green technology, renewable energy, globalization, environmental policy stringency, and CO2 emissions. Our findings indicate that green technological development, renewable energy, and stringent environmental policies positively contribute to the green trade transition, while CO2 emissions and globalization have negative effects. A key conclusion of our analysis is the “globalization paradox”: Globalization is associated with a weaker GTT, largely because its economic dimension continues to favour non-green industries. This study contributes to the trade-environment literature by formalizing the GTT and identifying its structural determinants. The results offer practical guidance for policymakers aiming to align global trade flows with long-term sustainability objectives.