How to achieve carbon neutrality while maintaining economic vitality: An exploration from the perspective of technological innovation and trade openness

Abstract

The significant drop in global carbon emissions in 2020 was credited to the enormous loss of economic activity from the impact of COVID-19. The challenge is now to reduce carbon emissions without causing massive disruption and damage to economic production. To achieve carbon neutrality while maintaining economic vitality, the impact of technological innovation and trade openness must be considered. This paper sets technological innovation and trade openness as core variables and establishes two extended Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) models. The first model focuses on carbon emissions and the second focuses on economic growth. Comparisons were made between the BRICS (i.e., Brazil, Russia, India, China, and South Africa) and G7 (i.e., Canada, France, Germany, Italy, Japan, the UK, and the USA) countries. The fully modified ordinary least squares (FMOLS) regression analysis was used to explore the impact of technological innovation and trade openness on low-carbon economic development. A Panel Granger Causality Test explores the causal relationship between the core, control and dependent variables. The results illustrate that: (1) technological innovation is the primary factor that inhibits carbon emissions and promotes economic growth in both international organizations, (2) trade openness promotes the growth of carbon emissions in BRICS countries, but restrains G7 growth, confirming the “Pollution Haven Hypothesis”, (3) per capita GDP is the largest contributor to carbon emissions growth in both the G7 and BRICS countries, which illustrates that per capita GDP is the largest contributor to carbon emissions. It is proportional to G7 and BRICS carbon emissions. This paper provides several policy recommendations: breaking through basic research, adjusting the science and technology evaluation system, optimizing the export trade structure, and increasing the proportion of renewable energy.