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This is a Quantitative Study study.

September 27, 2025

Ecological Sustainability in OECD Countries: The Divergent Effects of Green Trade, Environmentally Friendly Technologies, Renewable Energy, and Environmental Taxation

Key Points

Green trade, environmentally friendly technologies, renewable energy, and environmental taxes reduce ecological footprint, but economic growth has a stronger positive impact.
The study examines 32 OECD countries over 22 years, revealing three distinct convergence clubs with unique environmental trajectories.
A two-step approach combines club convergence analysis and dynamic system generalized method of moments to assess policy effects on ecological sustainability.
These findings underscore the need for club-specific environmental strategies, challenging the assumption of homogeneity in sustainability outcomes among OECD countries.

Abstract

ABSTRACT The differential impacts of green transition policies—renewable energy, green trade, environmentally friendly technologies, and environmental taxes—on ecological sustainability are critical for policy design. This study examines these effects across 32 OECD countries from 2000 to 2022. Distinct from prior research, it employs a two‐step approach combining club convergence analysis and a dynamic system generalized method of moments (GMM) estimator to address heterogeneity and endogeneity, offering a novel methodological contribution. Convergence analysis reveals that OECD countries do not move toward a single steady‐state ecological footprint; instead, three distinct convergence clubs emerge, each with unique environmental trajectories. Building on this divergence, the study analyzes the impacts of green trade, environmentally friendly technologies, renewable energy, environmental taxes, and economic growth on ecological footprint within each club. Full‐panel results show that green trade, environmentally friendly technologies, renewable energy, and environmental taxes reduce ecological footprint, though effect sizes are modest compared with the consistently strong positive impact of economic growth. Club‐specific results reveal asymmetries: Club 1 benefits mainly from green trade and environmental taxes but remains vulnerable to growth pressures. Club 2 achieves its largest gains through renewable energy, while environmental taxes have limited influence. Club 3 relies on environmentally friendly technologies, with green trade showing no significant effect. These findings highlight the need for club‐specific environmental strategies and challenge the assumption of OECD homogeneity in sustainability outcomes. The study provides novel empirical evidence and actionable insights for aligning ecological sustainability with green transition policies and economic growth.

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