How does environmental policy stringency influence green innovation for environmental managements?

Abstract

In the struggle to limit global climate change and rising temperatures, the United Nations Climate Change Conference (COP27) was held in Egypt last November. Bringing together nations to recognize climate change as a global concern and to create new “building blocks” to enhance the implementation of the Paris Agreement through actions that can move the world toward a greener, and carbon free future. This study examines a panel of high-income economies from the Organization for Economic Cooperation and Development (OECD) to investigate the empirical linkage between Green Innovations (GI), Disaggregated trade (exports and imports), Environmental policy stringency (EPS), and Consumption-based carbon dioxide emissions from 1990 to 2020. We proceed with the panel cointegration check based on the results of the diagnostic tests. The method of moment quantile regressions (MMQR) is used to investigate the relationships between CCO2 and various variables in different quantiles. The data show that GI, export, imports, and EPS are major contributors in explaining the substantial variance in CCO2 emissions in the chosen panel. Specifically, severe environmental rules boost the benefits of green technologies through the use of environmentally friendly technology. Imports, on the other hand, have been determined to be harmful to environmental quality. As a result, member economies should reform their environmental policies to include consumption-based emissions objectives and discourage people’ desire for carbon-intensive items from developing countries. This will eventually result in a decrease in consumption-based carbon emissions, assisting in the achievement of true emissions reduction goals and COP27 targets.