LAUSR

Abstract Ascertaining cleaner production and sustainability is a major issue in the developed and developing world; income and international trade are the predominant factors behind this. This article explores the heterogeneous impacts of export product diversification, extensive margin, and intensive margins on the CO2 emissions for developing and developed countries. To this end, the authors analyze the annual data of variables from 1971 to 2014 and employ unrestricted fixed effects and system GMM to solve the research problem. The empirics suggest that all three indicators of export diversification significantly reduce CO2 emissions in 63 developed and developing countries as a global sample. The fixed effect models reveal that product diversification and intensive margin have a negative and significant impact in developed economies. The negative impacts of product diversification show that economic sophistication is an important tool to reduce emissions. Further, the Chow test proved the statistical difference between developed and developing economies, which contributes to policy recommendations. Based on the empirical outcomes, the study suggests innovative policies for cleaner production and industrial manufacturing purposes, making the policies more effective in achieving Sustainable Development Goals (SDGs).