Do world uncertainty and income inequality moderate the efficacy of environmental innovation in driving global renewable energy generation?

Abstract

ABSTRACT Environmental innovation is pivotal in tackling climate change by offering diverse and practical solutions to reduce carbon footprints, promote resource conservation, and enhance ecological sustainability. As anthropogenic activities continue to accelerate global environmental degradation, innovative solutions are imperative for mitigating the impacts of climate change and fostering sustainability. However, the effectiveness of these innovations is threatened by global uncertainties and rising income inequalities. Uncertainties in geopolitical landscape and economic disparities may impede the development and widespread adoption of eco-friendly technologies and practices. Given the above background, this study empirically investigates the influences of environmental innovation, world uncertainty and income inequality on renewable energy generation for a balanced panel of 58 countries between 1990 and 2020. The estimated models also control for the effects of globalisation and economic growth. After diagnosing for necessary panel diagnostic tests including cross-sectional dependence, heterogeneity, and panel unit-root, the Westerlund cointegration test confirms a significant long-run relationship between the variables of the study. Using panel Augmented Mean Group (AMG) estimation, the results reveal that while environmental innovation continues to promote the renewable energy generation, global uncertainty and income inequality hamper it. More importantly, the moderating effects of world uncertainty and income inequality reduce the favourable impact of environmental innovation on renewable energy generation. Besides, economic growth and globalisation continue to play critical roles in speeding up the quest for renewable energy. The PCSE estimation technique confirms the significance of these baseline findings. Potential policy implications are also discussed.