A one-of-a-kind study undertaken by researchers at the Indian Institute of Management (IIM), Lucknow, debunks the assumption that development leads to environmental degradation.
In fact, it establishes the fact that when firms enter export markets, they tend to improve their energy efficiency, and these improvements persist over time. According to the study, adoption of advanced foreign technologies improves a firm’s energy efficiency by 25 per cent within three years, compared to similar non-exporters.
Led by Chandan Sharma, professor of Economics and Business Environment at IIM-Lucknow, the study analysed two decades of firm-level data to prove that exports not only boost business growth, but also make Indian factories greener.
It has been published in the prestigious Energy Economics (Elsevier) journal.
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“Our research shows that exports don’t just boost growth, they also make Indian factories greener. Within a few years of entering global markets, companies become more energy efficient, largely by adopting advanced technologies,” said Sharma, adding that it highlights how trade can be a partner in India’s journey toward sustainable and competitive manufacturing, apart from creating jobs.
By applying the Propensity Score Matching–Difference-in-Differences (PSM-DID) methodology, the researchers explored several important insights.
“We found that exposure of non-exporting firms to export-intensive industries leads to efficiency improvements. The findings also validate the robustness of results across multiple methods, alternative measures, and extended samples,” Sharma said.
The gains by these companies were largely driven by access to more advanced foreign technologies, showing that trade too can serve as a channel for technology diffusion.
“By highlighting this connection, our study contributes to policy discussions on aligning trade with environmental objectives, particularly in developing economies facing the dual challenges of economic growth and ecological responsibility,” he added.
According to the professor, the findings of the study are relevant for policymakers who can induce exports by aligning trade policy with energy efficiency objectives.
It also shows that international trade can become a driver of green growth to meet India’s climate goals under the Paris Agreement.
“For instance, promoting foreign technology access, providing incentives for firms to upgrade to energy-efficient processes and reinforcing environmental standards among export-oriented industries,” Sharma said.
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