Are eco-innovation and export diversification mutually exclusive to control carbon emissions in G-7 countries?

Abstract

Most of the member countries of COP21 have been struggling to devise relevant policies in order to control carbon dioxide (CO2) emissions since the Paris agreement in 2015. In our view, without analyzing the role of two extremely important variables i.e., ecological innovation and export diversification, in the whole chain of carbon emissions, expecting significant results from such policies would be far fetched. This study, therefore, is aimed to explore the effect of export diversification (ED) and ecological innovation (EI) on carbon emissions for G-7 countries from 1990 to 2017, along with renewable energy consumption (REC) as an important control variable. The results show that export diversification (ED) increases carbon emissions; however, ecological innovation (EI) helps reduce carbon emissions, and similarly, renewable energy consumption (REC) also controls carbon emissions. More important, however, is the realization that the negative impact of export diversification on the CO2 emissions gets weakened as the degree of environmental innovation increases. Based on our findings, the promotion of renewable energy, along with the adoption of environmentally friendly technology, is strongly recommended for G-7 countries. Our results also highlight that Government policies regarding export diversification (ED), ecological innovation (EI), and renewable energy consumption (REC) approximately take more than a year to be able to deliver the results effectively.