The synergistic effect of green trade and economic complexity on sustainable environment: A new perspective on the economic and ecological components of sustainable development

Abstract It is commonly argued in what is termed the degrowth strategy that economic growth cannot occur side by side with environmental protection. In this study, it is instead argued that the spread of green products through economic complexity and international trade are possible means of solving this problem. To this end, the individual and interactive environmental impacts of economic complexity and international green trade are examined in a panel of 24 European Union nations between 2000 and 2018. Panel quantile regressions (QRs) and Driscoll‐Kraay fixed effect‐OLS regressions are employed in analysing the relationships. The findings reveal that both green trade and economic complexity have beneficial individual effects on the environment. Their interaction effect further confirms that they have a complementary synergistic impact on the environment of the 24 EU countries. It thus implies that both green trade and economic complexity act better together than separately. Countries interested in achieving sustainable environment can do so by raising local productive capabilities, such that they are able to quickly transition into the production of technology‐intensive, eco‐friendly items. Alternatively, they can also explore the unique benefits provided by international trade in green products in cases where they do not have the ability to locally produce certain green goods. Better still, they can pursue both objectives simultaneously.