Effects of European Union’s Environmental Policy Stringency on Ghana’s Exports: Does the Quality of Institution Matter?

Abstract

The study sought to examine the effects of the European Union’s environmental policy stringency on Ghana’s exports. In addition, the study also sought to examine how Ghana’s institutions affect the adoption of the European Union’s environmental policy stringency in her exports. The study employed the Stochastic Frontier Gravity Model on exports to 17 European Union member countries from Ghana using data from 1990 to 2019. The study revealed that the European Union’s environmental policy stringency negatively affects Ghana’s exports. Like the European Union’s environmental policy stringency, institutional quality was also found to negatively affect Ghana’s export. In addition, the study found that Ghana’s institutions perform poorly in helping with the policy compliance. As such, the study therefore recommends that the Ghanaian Government initiate a discussion on the harmonization of standards with the European Union in a mutually beneficial arrangement to primarily lessen disparities in standards. The study also recommends that, strengthening institutions (like the Environmental Protection Agency, Ports and Harbors Authority, Ghana Standards Authority, Customs services etc.) in charge of regulating exports would help minimize the pollution haven effect.