Environmental taxation, institutional quality and trade development nexus in sub-Saharan Africa

Purpose This study assesses the moderating and threshold impact of environmental tax and institutional quality on enhancing the international trade capabilities of economies in sub-Saharan Africa (SSA). Design/methodology/approach The study employed the system generalised method of moments and a dynamic threshold estimation technique on annual panel data from 24 emerging economies in SSA between the period 2010 and 2024. Findings The study revealed that environmental taxation has a nonlinear impact on trade in sub-Saharan Africa, turning from negative to positive only when institutional quality surpasses specific thresholds. Political stability, regulatory quality and government effectiveness significantly condition whether environmental taxes hinder or enhance trade. Research limitations/implications The study recommends that policymakers in SSA align environmental tax reforms with institutional strengthening. Reforms should be sequenced based on governance capacity, supported by readiness diagnostics and coordinated regionally to avoid emissions leakage and protect trade competitiveness. Originality/value This study is the first to apply a threshold framework to environmental taxation and trade in SSA, identifying governance tipping points. It moves beyond conventional models by treating institutional quality not as a control but as a structural determinant of policy success, offering a new lens on sustainable trade transitions in developing economies.