Unintended consequences of trade in environmental innovation: Agricultural emissions, sectoral leakage, and the Kuznets curve hypothesis

Mitigating emissions from the agricultural sector is crucial for achieving sustainable development goals. However, controlling emissions in one sector can lead to unintended consequences in others through leakage effects. Grounded in the theoretical propositions of sectoral shift theory (SST), the rebound effect, and leakage effects, this study investigates the asymmetric impact of environmentally sound technology (EST) imports and exports on agricultural emissions (N₂O and methane) within the framework of the agricultural Kuznets curve (AKC). Utilising a balanced panel dataset of 105 countries from 2010 to 2020, we employ the Westerlund cointegration test to establish long-run relationships among variables. Method of Moments Quantile Regression (MMQR) estimations reveal a positive effect of EST imports and exports on agricultural N₂O emissions, intensifying the impact at higher quantiles. This suggests that industrial emission reductions through EST may have unintended consequences in agriculture via two mechanisms: emission leakage from industry to agriculture and increased agricultural emissions resulting from productivity improvements through the rebound effect. Nevertheless, in line with SST, our results indicate that sustainable agricultural trade can contribute to mitigating agricultural emissions. The AKC hypothesis holds across almost all models. These findings underscore the importance of developing tailored policies to design EST specifically for the agricultural sector, ensuring more effective emission reductions.