A pathway toward future sustainability: Assessing the influence of innovation shocks on CO2 emissions in developing economies

The prior empirical research focuses on examining only the procyclical impact of innovation on carbon emissions (CO2e), in the majority of cases, for advanced economies. The current paper contributes to the extant literature by integrating positive and negative shocks of innovation in the model to scrutinize their potential effects on CO2e for the sample of 46 developing economies. Globalization (GLOB), renewable energy consumption (REC), fossils fuels consumption (FFC), foreign direct investment (FDI), and GDP per capita are embodied as control variables. The application of panel Fully modified ordinary least squares (PFM-LS) and panel Dynamic least squares (PD-LS) approaches exhibits the following results. First, the positive shocks of innovation disrupt the deleterious repercussions of CO2e, while the negative shocks deteriorate the environmental quality. Second, globalization and REC enhance the ecological quality by curbing CO2e. Third, FDI and FFC show the direct association with CO2e and make the pollution issue more alarming. Lastly, the impact of GDP growth also remains unfavorable, and it escalates the ratio of CO2e. The study also includes the positive and negative shocks of globalization and REC in the model to confirm its robustness. Interestingly, the impact of shocks in innovation on the ecological quality remains consistent, indicating the findings' robustness. For a sustainable future, the article's findings suggest to adopt the innovation shocks as a policy instrument for formulating better environmental policies. Also, some study limitations are presented, which may provide some new sights for future research.

Automated summary

This study examines the impact of innovation on CO2 emissions in developing countries and finds that positive innovation shocks can mitigate environmental degradation, while negative innovation shocks exacerbate pollution issues; globalization and renewable energy consumption have positive effects on improving ecological quality, while foreign direct investment and fossil fuels consumption are directly related to CO2 emissions.