Do Environmental Regulation Influence The Trade Competitiveness Of Solar Energy Products?

Studies analyzing renewable energy market development usually investigate additionalcapacity or investment. Characteristics, roles and determinants of cross border trade withrenewable energy system components remain blurred. The Porter hypothesis and the lead marketliterature argue that environmental regulation leads to a comparative export advantage, Empiricalstudies testing both hypotheses reach diverging conclusions and rarely focus on the renewableenergy sector. Using solar energy technology components(SETCs), this study adds to theliterature by explaining exports of environmental technologies. The analysis uses a gravity trademodel and a panel dataset to test the role of environmental regulation on SETCs exports fromChina. The key findings show that countries with more stringent environmental regulationimported more solar products from China, while no regular relationship between Chineseenvironmental regulation and its solar exports comparative advantage. However, when analyzingall countries, the result is consistent with the Porter hypothesis where environmental regulationrepresents a significant source of comparative advantage.