Green innovation and carbon emissions: the role of carbon pricing and environmental policies in attaining sustainable development targets of carbon mitigation-evidence from Central-Eastern Europe

Sustainable Development Goals (SDGs) are enforced by a set of instruments, among which environmental regulations, green innovation, and carbon taxes play a central part. This article aims to investigate the mitigation capacity of the above-mentioned elements using a sample of 15 European countries. This study takes CO2 and greenhouse gas emissions (GHG) into account to ensure the consistency and accuracy of the findings. Augmented Dickey-Fuller and CIPS unit root tests, Pesaran CD, Bias-corrected scaled LM are employed to check the cross-sectional dependence. The panel effect is tested using error correction-based modeling along with dynamic approaches, while the Granger causality technique employs country-related outcomes. The results show that innovation and environmental policies help in reducing emissions both in the long and the short run. In addition to this, carbon pricing mitigates emissions in the regions although its effect is more country-specific. We find evidence of both unidirectional and bidirectional causality among the variables. However, in a few cases, they are too a country-specific artifact. As a general conclusion, carbon pricing is an efficient short-run tool to achieve SDGs. At the same time, long-run sustainability relies on green innovation and environmental policy stringency in the region.

Automated summary

This study investigates the impact of environmental regulations, green innovation, and carbon taxes on emissions reduction in 15 European countries. The results show that green innovation and environmental policies help reduce emissions in both the long and short term. Carbon pricing also mitigates emissions, but its effectiveness varies across countries. The study also finds evidence of both unidirectional and bidirectional causality among the variables, although some cases are country-specific.