Do imported environmental goods reduce pollution intensity? The end use matters

The trade liberalization of environmental goods (EGs) would represent an opportunity for achieving the “triple-wins” outcome regarding trade, the environment, and development. This study focuses on the environmental outcome by investigating the relationship between imports of EGs and pollution intensity. Considering that most of the prevailing defined EGs can have both environmental and non-environmental end uses (i.e., the multiple-end-uses problem), we first classified EGs into type A EGs that are mainly intended to address a certain environmental issue but can be put into some non-environmental end uses, and type B EGs that only have environmental end uses. Then by using a novel panel dataset covering 269 prefecture-level cities in China from 2003 to 2013, we proved that total imported EGs and imported type A EGs do not inevitably benefit the environment. In contrast, an effect of imported type B EGs on reducing pollution intensity (especially PM2.5 intensity) exists. There are two possible influencing channels: factor substitution and technology upgrading. Cities subject to more environmental incentives are more sensitive to the factor substitution channel, while cities with more advanced absorptive ability have a more potent response via the technology upgrading channel. Finally, we determined that total imported EGs can further improve the proportion of eco-industry and high-tech industries. This effect may yield environmental benefits in the future.