Does technology innovation help to achieve carbon neutrality?

Abstract

Technological innovation (TI) can optimise energy structure and achieve green development, notably by reducing carbon dioxide (CO2) emissions. In the context of global warming, testing whether TI can reduce CO2 emissions is essential to achieve carbon neutrality. Therefore, the rolling-window method is used to overcome the issue of non-constant parameters in VAR systems and time series and further examines the role of TI in mitigating carbon pollution. The findings reveal that TI has both positive and negative effects on CO2. The negative impact suggests that TI is an efficient way to reduce CO2 emissions. This outcome is consistent with the energy-environment model, implying that TI has prominent potential to decrease climate change risks and accomplish net-zero emissions. Nevertheless, the positive effect indicates that the rebound effect of TI will increase energy consumption and cause more pollution. Conversely, the negative link of CO2 on TI means governments tend to make greener policies to reduce carbon pollution under intense environmental pressure. Thus, governments should accelerate the process of energy structure transformation and encourage ecological innovation development related to environmental protection. Besides, financial institutions must provide ample funds to launch low-carbon development strategies, mitigate climate change and promote sustainable economic growth.