Abstract:
The rising concern about environmental pollution has led to a rapid increase in global supply and
demand for environmental goods. According to Porter’s Hypothesis, stringent environmental
policies enable the domestic and global import demand for environmental goods. This study is an
attempt to investigate the impact of environmental policy stringency on Pakistan’s environmental
goods export. The gravity model has been utilized in this study to estimate the impact of
environmental stringency on Pakistan’s environmental goods export. The regression analysis in
this study consists of panel data, covering 32 cross-sectional observations (countries) and 14 time
series observations (years). The results of a regression analysis using the feasible generalized least
square methodology suggest that Porter’s Hypothesis is partially validated in Pakistan’s case,
where domestic environmental stringency cripples and foreign environmental stringency
stimulates country’s environmental goods export. Binding commitments of importing countries
towards Kyoto Protocol hamper Pakistan’s environmental goods exports. This study also
highlights Pakistan’s current export potential of environmental goods. The revealed comparative
advantage index and 4-product-lines classification in 2021 shows that total of 78 products are
designated as emerging product lines. The right set of environmental policies can help to achieve
a comparative advantage in emerging environmental goods; thus, Pakistan’s environmental
policies need to be articulated in a manner that can support the country’s environmental goods and
services sector.
