The impact of environmental policy on green technology development and green product competitiveness: Evidence from 50 countries.

The importance of environmentally related tax policies and incentives as a strategy to foster the transition to cleaner production processes and broader sustainable development has been explored in many studies. However, the effects of such policies and regulations on advancing green technologies and competitive green product development remain unclear. The aim of this study is to address this gap by constructing a Partial Least Squares - Structural Equation Model (PLS-SEM) to explore the interaction effects between these policies in 50 countries from 2010 to 2021. This study tests three hypotheses and the results identified three key findings. First, countries environmental regulation on imposing environmentally related tax policy is not sufficient to foster green technology development. Second, countries with green tax policies and incentives are better positioned to advance their productive capabilities in order to produce and export more competitive green products compared to their trading partners. Third, the results reveals that countries effort in advancing and diversifying their green technologies enhance the sophistication of the green products they produce and export. In addition, the findings of this study provide both theoretical and managerial implications, suggesting that through the proper adoption of environmental tax policies and regulations, countries can build stronger technological and innovation ecosystems and diversify their green production baskets with more competitive green products.