Explaining the environmental efficiency capability of energy mix innovation among the Nordic countries

Abstract

Improving the environmental efficiency performance of energy mix is important to the global carbon neutrality goal. Given this motivation, this study delves into providing more explanation about the role of innovation approaches to coal, oil, and natural gas energy resources in the Nordic economies i.e., Denmark, Finland, Norway, and Sweden during the period 2000–2019. To achieve this objective and reach an evidence-based insight for policy formulation, the present study leveraged robust panel econometrics estimators that circumvent cross-sectional dependence and heterogeneity issues in the investigated blocs. The empirical evidence shows that economic growth (GDP), coal energy, oil and natural gas contribute to the Nordic economies' environmental degradation in the short- and long-run. Contrarily, innovation via environmental-related patents mitigates environmental degradation, especially in the long run. Furthermore, the interaction models, i.e., applying innovative approaches in the energy mix's consumption, can mitigate carbon emissions across the countries, thus significantly improving environmental sustainability. Specifically, innovative approaches in coal, oil, and natural gas consumption improve environmental sustainability by mitigating carbon emissions, thus delivering respective environmental efficiency improvements of ∼94%, ∼108%, and ∼123%. Additionally, Granger causality evidence further suggests that the examined factors are significant drivers of the environmental indicator. Regarding policy insight, this study affirms that further improvement in energy savings is vital to continuously deploying the conventional energy mix.