Can Environmental Regulations Drive International Trade? Lessons for Asia from the European Union’s Performance of Buildings Directive

Helble, Matthias; Majoe, Adam

doi:2020.35.1.69

The Journal of Economic Integration 2020 March;35(1) :69-90.
DOI: https://doi.org/10.11130/jei.2020.35.1.69

Can Environmental Regulations Drive International Trade? Lessons for Asia from the European Union’s Performance of Buildings Directive

Matthias Helble ¹ and Adam Majoe ²

¹Asian Development Bank, Philippines
²Waseda University, Japan

Corresponding Author: Adam Majoe ,Tel: +81 80 4110 2087, Email: amajoe@moegi.waseda.jp

ABSTRACT

International trade is one of the key mechanisms for the diffusion of energy-efficient technologies. Yet, little is known about how environmental regulations, such as those aimed at increasing energy efficiency, affect international trade in environmental or green goods. This paper studies the case of the Energy Performance of Buildings Directive, which was adopted in 2010 by the European Union. We use pooled ordinary least square and Poisson estimators to empirically test whether and how differences in implementation affected trade in relevant products. We find strong evidence that those EU member states that implemented the directive to a large extent had substantially higher import volumes of environmental products at possibly lower prices. For certain environmental products, exports equally increased. Our paper is the first to show that the implementation of environmental regulation can spur international trade in environmental products. These findings can provide important lessons for Asia and help transform it into a more competitive, prosperous, and greener region.

JEL Classification

F10: General
F14: Empirical Studies of Trade
F18: Trade and Environment

Keywords: EU Energy Performance of Buildings Directive | Asia | International Trade | Energy-Efficient Technologies | Non-market Instruments