Environmental performance in export markets and agricultural exports: Green innovation as a conditional enabler

This is the authors' abstract. We don't add key points for this paper.

Environmental upgrading in destination markets is increasingly reshaping the competitive landscape for agricultural exporters from emerging economies. Yet whether environmental pressure acts as a trade barrier or a catalyst for export upgrading remains unclear. This study examines how trading partners' environmental performance interacts with green innovation to shape Vietnam's agricultural export outcomes, using panel data covering 30 countries over 2011–2023 within a structural gravity (PPML) framework. The study finds that stricter environmental performance standards in importing countries reduce agricultural exports, reflecting compliance costs and non-tariff barriers. However, this effect is not uniform. As green innovation capacity improves, exporters are better able to adapt to environmental requirements, thereby mitigating adverse impacts and, in some cases, transforming environmental pressure into a market access advantage. Importantly, the role of green innovation is dynamic. In the initial stage, it may impose adjustment costs and weaken competitiveness, but over time it enhances technological capability and production efficiency, supporting export performance. Moreover, these effects vary across destination markets, indicating that the trade impact of environmental performance depends critically on the level of environmental standards faced by exporters. These findings suggest that green innovation is not inherently beneficial or costly, but rather a conditional mechanism that determines whether environmental performance constrains or enhances export competitiveness. The study contributes to the trade–environment literature by highlighting the context-dependent nature of environmental impacts and offers policy-relevant insights for emerging economies navigating the global green trade transition.