Green trade or green technology? The way forward for G-7 economies to achieve COP 26 targets while making competing policy choices

Making a country's Trade environmentally friendly, aka the Green Trade through environmental restrictions, has long been a popular policy choice, especially for the wealthy and trade-integrated economies. However, the effectiveness of such regulations in terms of improved environmental quality is an essential but less investigated research question. In this paper, we analyze, for G-7 countries, the environmental effects of the two competing policy choices, i.e., imposing environmental restrictions on Trade or investing in green technology and inno-vation, by following a rigorous econometric approach. Our results are exciting and, to some extent, contrary to mainstream ideas. We find that the increasing share of Green trade in the overall trade portfolio of G-7 countries is futile and more damaging for the environment by causing an increase in consumption-based carbon emissions. On the other hand, the role of Green technology is highly effective in reducing these emissions in the panel of G-7 countries. These results highlight the effectiveness of the two competing policy choices almost every country must make to protect the climate and stop further environmental degradation.