Revisiting the load capacity curve for sustainable development: the roles of plastic waste trade, digital trade, and biotrade in OECD countries

Abstract

This study examines the validity of the Load Capacity Curve (LCC) hypothesis and assesses the environmental implications of emerging trade structures, focusing on BioTrade, digital trade, and plastic waste trade. Using a balanced panel of 36 OECD countries from 2011 to 2023, the analysis investigates how income dynamics and trade composition jointly influence the load capacity factor (LCF). Methodologically, the study employs the regularized Common Correlated Effects (rCCE) estimator and the Bias-Corrected Method of Moments (BCMM) approach. The empirical findings provide robust evidence supporting the LCC hypothesis, revealing a U-shaped relationship between income and LCF in OECD economies. Digital trade and BioTrade significantly enhance ecological capacity, reflecting the roles of technological diffusion, efficiency gains, and biodiversity-oriented economic activities. In contrast, plastic waste trade has a detrimental effect on LCF, highlighting the environmental risks associated with waste-driven trade flows. Based on these results, the study recommends that OECD countries strengthen digital and biodiversity-based trade channels while tightening regulations on plastic waste trade. Leveraging the LCC mechanism through sustainability-oriented trade policies can enable advanced economies to convert economic growth into long-term ecological resilience.