Do green finance, green technology innovation, and institutional quality help achieve environmental sustainability? Evidence from the developing economies

Abstract

One possible way to achieve sustainable economic growth is by limiting carbon dioxide (CO2) emissions. The developing countries, in particular, which significantly contribute to global carbon dioxide emissions, need a paradigm shift towards sustainable production and consumption to achieve economic growth while ensuring environmental sustainability. This study thus analyzes the role of green technology innovation, green finance, renewable energy use, institutional quality, and agricultural value added in attaining environmental sustainability by abating CO2 emissions for 25 select developing countries from 1998 to 2019. This study uses the Driscoll‐Kraay and two‐step SGMM estimators to assess the impact of independent variables on the response variable, acknowledging the endogeneity problem in the model. The empirical findings reveal that green finance, green technology innovation, and institutional quality induce CO2 emissions, whereas agricultural value‐added and renewable energy use are observed to have detrimental effects on CO2 emissions. Moreover, the moderation effect of green technology innovation and institutional quality with green finance is observed to have a weak and insignificant impact on CO2 emissions. The study thus recommends that developing countries enforce policies to promote investments and innovation in the clean energy sector to attain sustainable development goals by mitigating carbon emissions.

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