Do technological innovations and trade openness reduce CO2 emissions? Evidence from selected middle-income countries

This paper examines the role of trade openness and innovation in reducing CO2 emissions in middle-income countries with the goal of improving environmental quality. The generalised method of moments (GMM) method is used to estimate the long-run association between variables and Dumitrescu-Hurlin causality test is used to examine causality for a panel of 23 middle-income countries from 1994 to 2018. The findings refute the existence of an inverted u-shape relationship between innovation and CO2 emissions. On the trade front, environmental deterioration is found to be relatively more severe in low middle-income countries than upper middle-income countries. Contrarily, the existence of the environment Kuznets curve (EKC) hypothesis for both country groups is also supported by the data; however, the fall in the EKC curve is insignificant for low middle-income countries. Implying that the quest to control carbon emissions has just begun in low middle-income countries and they must target a higher level of green innovation to reduce the ever-rising CO2 emissions. It is also suggested to promote economic growth through knowledge spillovers and to establish a pollution level standard for trading and manufacturing sectors which generate the most contaminated waste.

Automated summary

This paper examines the role of trade openness and innovation in reducing carbon dioxide emissions in middle-income countries. The findings suggest that there is no inverted U-shaped relationship between innovation and CO2 emissions. Additionally, the study finds that environmental deterioration is more severe in low middle-income countries compared to upper middle-income countries. The existence of the environmental Kuznets curve is supported by the data for both country groups, but the decline in the curve is not significant for low middle-income countries.