Biocapacity-based assessment of trade openness and environmental quality in G20 countries

This study investigates the relationship between trade openness and environmental degradation in G20 countries using a comprehensive sustainability framework that extends beyond carbon-centric assessments. In contrast to the prevailing focus on CO₂ emissions, the analysis prioritizes the inverted load capacity factor, a biocapacity-based indicator that captures the imbalance between ecological demand and available natural resources. Ecological footprint and CO₂ emissions are additionally included to ensure robustness and comparability. The study employs panel data methods and panel quantile regression to account for heterogeneity across different levels of environmental pressure. The empirical findings provide strong support for the Environmental Kuznets Curve hypothesis, indicating that economic growth initially intensifies environmental degradation but leads to environmental improvement beyond a certain income threshold. Trade openness is found to generally alleviate environmental pressure, with its mitigating effects being more pronounced when environmental sustainability is assessed using the inverted load capacity factor. This suggests that technology diffusion, efficiency gains, and cleaner production mechanisms outweigh scale effects in most G20 economies. However, adverse trade-related environmental impacts persist at higher levels of ecological stress, highlighting asymmetric dynamics. In addition, globalization and human capital development significantly enhance environmental sustainability. Overall, the results highlight the necessity of aligning trade liberalization with environmental regulation, clean technology diffusion, renewable energy deployment, and sustained investment in human capital. By prioritizing a biocapacity-oriented indicator of environmental degradation, this study contributes to the cleaner production literature and offers policy-relevant insights for advancing sustainable and low-carbon development pathways in both advanced and emerging G20 economies.