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There are many economic parameters that may affect environmental degradation.At the forefront of these parameters is the productive economic structures of the countries The present paper discusses the dynamic relationship between carbon dioxide (CO 2 ) emissions, economic growth and productive capacity index (PCI) for a panel of 38 OECD countries spanning the period 2000-2018. The empirical study applied PMG-ARDL approach, panel cointegration techniques and Granger causality tests the examine the short and long-run association between the variables. The cross-sectional dependence test of Pesaran (2004) revealed the use of the second generation panel unit root tests (CADF and CIPS). The cointegration relationships between the variables are proved using Westerlund and Pedroni cointegration tests. The estimated coefficients of PMG-ARDL revealed that the environmental Kuznets curve (EKC) hypothesis is established. Besides, the empirical findings obtained from long-run estimation confirm that productive capacity has a significant role on increasing environmental quality.

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Trade is a significant parameter that may impact environment positively or negatively. However, there is no consensus on this issue among the researchers. It seems likely that tradable products will affect the environmental quality level. However, this requires the separation of the international trade basket. Thus, this research asks whether trade in non-green products affects the level of environmental degradation in the 25 European Union (EU) member states? To answer this question, we develop an index of trade openness in non-green products and empirically investigate whether this index influences the ecological footprint. Non-green trade openness index represents the ratio of the total export and import of non-green products in a country’s international trade basket to that country’s Gross Domestic Product. Advanced panel estimation techniques are employed for a sample of 25 EU countries over the period between 2003 and 2016. The core finding–supporting the Pollution Haven Hypothesis–is that non-green trade openness reduces environmental degradation. We discuss several implications of this result for recent environmental policies, particularly for the EU climate policy.

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