Greening economic sectors through trade liberalization and efficient governance

Greening economic sectors has become a prominent focus in sustainability research over recent decades. This paper investigates how trade liberalization and effective governance influence the greening of the industrial and agricultural sectors within G7 countries from 1996 to 2022, utilizing data from the World Bank’s WGI database and the Autoregressive Distributed Lag (ARDL) model. Findings reveal that trade liberalization has a negative impact on both green industry and agriculture in both short- and long-term perspectives, with substantial declines noted. In contrast, good governance supports green industry development but has minimal impact on green agriculture, likely due to varying regulatory effects. Additionally, population growth and poverty hinder greening in both sectors, while higher income levels promote sustainable practices. Causality analysis indicates bidirectional relationships between governance, trade liberalization, and green industry. Policy recommendations include strengthening governance structures, adopting green trade policies, investing in eco-friendly technologies, addressing social inequalities, encouraging international partnerships, and establishing rigorous monitoring systems to advance sustainable development goals.