Environmental performance and international trade in China: The role of renewable energy and eco‐innovation

Renewable energy and green innovation can enhance environmental performance by encouraging international trade, as anticipated by the current theoretical framework. This study investigates how renewable energy and eco‐innovation affect international trade and environmental performance using quarterly data series from 1981 to 2018 for China. The study applies a quantile‐based autoregressive distributed lag model. The results indicate that environmental innovation and renewable energy are consistent with environmental quality, while trade openness and urbanization contribute to environmental degradation by stimulating CO2 emissions. In addition, the quantile causality test showed a bidirectional causality between renewable energy and CO2 emissions, trade openness and CO2 emissions, and urbanization and CO2 emissions. Additionally, the findings lend theoretical support for the formulation of environmentally protective policies to better understand the role of renewable energy in stimulating international trade, which eventually enhances environmental performance. Integr Environ Assess Manag 2022;18:813–823. © 2021 SETAC Key Points The study applies the Quantile based Autoregressive Distributed Lag Model. The results indicate that eco‐innovation and renewable energy are consistent with environmental quality. Trade openness and urbanization contribute to environmental degradation.