Environmental Regulations and Carbon Emissions: The Role of Renewable Energy Research and Development Expenditures

Abstract

This present research offers fresh insights regarding the causality nexus between environmental regulations and a sustainable environment. Also, this study considered the importance of renewable energy research and development (RERD), technological innovation (TI), and economic growth (GDP). Using the U.S. extended dataset covering the period 1990–2020; this research employed the wavelet methods (wavelet power spectrum and wavelet coherence) to observe the causal connections between mentioned variables based on the time-frequency domain. The empirical results from the wavelet power spectrum asserted that carbon emissions (CO2), RERD, and TI are vulnerable during the study period, while GDP and environmental policies are stable. Additionally, the wavelet coherence approach unveils relationships both in-phase and anti-phase. A causal connection is evident between CO2 and other variables. Particularly, a unidirectional causality is found from TI to CO2 emissions, while a bidirectional causal association exists between GDP and CO2, and environmental policy stringency, and CO2. Moreover, a bidirectional causality exists between RERD and CO2, but this association is insignificant. Based on findings, this research suggests enhancing RERD investment, strengthening environmental regulations, and promoting green technological innovation to attain a sustainable environment.