Exploring the heterogeneous effects of technological innovations on environmental sustainability: Do structural change, environmental policy, and biofuel energy matter for G7 economies?

Abstract

The global economy has realized that global warming issues should not be treated with levity. Instead, conscientious and meticulous measures must be taken to address the unwavering ravaging impacts of ecological complications of which technological innovations stand out. Despite the emphasis on technology as a viable pathway to zero emissions by the recent 26th Conference of the Parties (COP26), the feasibility of achieving the global target remains vogue from the empirical perspective. Hence, this study presents the first empirically based evidence on the heterogeneous effects of technological innovations on environmental sustainability in Group of Seven (G7) countries from 1995 to 2019. For robust policy insights, the study controls for the functional roles of structural change, environmental policy, biofuel energy, and trade openness in verifying the empirical model. The empirical evidence relies on second-generation estimators comprising cross-sectional autoregressive distributed lag (CS-ARDL), augmented mean group (AMG), common correlated effects mean group (CCEMG), and panel method of moment quantile regression (PMMQR) that are robust for the issues of slope heterogeneity and cross-sectional dependence. The main findings show that the various components of technological innovations, structural change, environmental policy, and biofuel energy support environmental sustainability by exerting statistically adverse effects on CO2 emissions. In contrast, trade openness appears as a deterrent to sustainable environment by statistically and positively impacting CO2 emissions. Besides, the findings reveal bidirectional and unidirectional causality pathways in the nexuses investigated for G7. Based on the empirical fallouts, viable policy insights that lead to achieving the net zero emissions target are formulated.