Are Mercosur economies going green or going away? An empirical investigation of the association between technological innovations, energy use, natural resources and GHG emissions

Abstract

The dynamic association between technological innovations, human capital and greenhouse gas (GHG) emissions has serious environmental repercussions. On the other hand, as significant as it is, this domain is inadequately investigated by environmentalists, and explored the indefinite and vague outcomes. In addition, these studies do not deal with the function of natural resources in determining environmental quality, in an explicit and precise manner. For that reason, realizing the need for a further rigorous and significant assessment of the intricacies concerned in studying GHG emissions, this study investigates the influence of technological innovations, economic growth, renewable energy, natural resources, and human capital on GHG emissions in Mercosur countries from 1990 to 2018. The analysis follows a second-generation perspective, which generates reliable and robust outcomes in the presence of slope heterogeneity and cross-sectional dependency. The long-run elasticity estimates calculated through the Driscoll and Kraay approach suggest that economic growth and natural resources significantly increase GHG emissions, while technological innovations, renewable energy, and human capital help to curtail them. The outcomes of the country-specific analysis are consistent with the Mercosur panel estimates. The findings of the Dumitrescu and Hurlin non-causality test reveal a feedback hypothesis between economic growth, human capital, renewable energy, and GHG emissions. The conservation hypothesis from technological innovation and natural resources to GHG emission is also discovered. Mercosur economies should increase their technological innovation activities and human capital to ensure that new firms and established companies can innovate rapidly in favour of sustainable development and lifestyle quality. The empirical findings of this study allow us to propose various policy suggestions for the Mercosur countries.