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Trade, finance, and the environment: The effects of green trade financing on carbon emissions

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  • Sun, Jin
  • Mohaddes, Kamiar
  • Cai, Meng

Abstract

The rapid expansion of green trade financing is reshaping global trade dynamics and offering new opportunities for carbon emission reduction. Our study examines the impact of Green Trade Financing on carbon emissions across a global sample of countries from 2012 to 2022, providing new insights into the environmental advantages of green or sustainable trade policies. The empirical results demonstrate that green trade financing significantly reduces carbon emissions, mainly through two channels: promoting green innovation and improving energy structure. Mechanism analysis confirms that it enhances firms' environmentally oriented innovation and facilitates the transition toward cleaner energy. These findings underscore the environmental benefits of green finance and highlight its role as a scalable instrument for sustainable development. The study also provides multi-level policy recommendations to operationalize green trade financing under diverse institutional conditions.

Suggested Citation

  • Sun, Jin & Mohaddes, Kamiar & Cai, Meng, 2026. "Trade, finance, and the environment: The effects of green trade financing on carbon emissions," Energy Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:eneeco:v:154:y:2026:i:c:s0140988326000265
    DOI: 10.1016/j.eneco.2026.109147
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    Keywords

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    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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