How does environmental policy stringency influence green innovation for environmental managements?

Area of Science:

• Environmental Economics
• Climate Change Policy
• Sustainable Development

Background:

• Global climate change necessitates international cooperation, exemplified by the UN Climate Change Conference (COP27).
• The Paris Agreement aims to transition towards a greener, carbon-free future.
• Understanding drivers of consumption-based carbon dioxide emissions is crucial for effective climate action.

Purpose of the Study:

• To investigate the empirical linkages between Green Innovations (GI), disaggregated trade (exports and imports), Environmental Policy Stringency (EPS), and Consumption-based carbon dioxide (CCO2) emissions.
• To analyze these relationships in high-income OECD economies from 1990 to 2020.
• To inform policy recommendations for achieving climate targets.

Main Methods:

• Panel cointegration tests were employed following diagnostic tests.
• Method of Moment Quantile Regressions (MMQR) were used to examine relationships across different quantiles.
• Data spanned from 1990 to 2020 for a panel of high-income OECD economies.

Main Results:

• Green Innovations (GI), exports, imports, and Environmental Policy Stringency (EPS) significantly explain variations in Consumption-based CO2 emissions.
• Stringent environmental policies enhance the effectiveness of green technologies.
• Imports were found to negatively impact environmental quality, increasing CO2 emissions.

Conclusions:

• Member economies should integrate consumption-based emissions targets into environmental policies.
• Policies should discourage demand for carbon-intensive imports.
• Reformed policies can lead to reduced consumption-based CO2 emissions, supporting COP27 goals and genuine emissions reductions.