Impact of green technology and energy on green economic growth: role of FDI and globalization in G7 economies

Abstract

With the increase in economic growth, the world is facing serious challenges concerning environmental sustainability. Hence, the green economic growth is imperative for sustainable and inclusive development. The objective of this study is to contribute to the existing literature about the factors that influence green economic growth. The study investigates the role of green technology, green energy, foreign direct investment, and globalization on green economic growth in G7 countries. The data of the study is collected from WDI, KOF Swiss Economic Institute, and OECD database and the data period ranges from 1995 to 2020. The existence of cointegration between the variables of the study was tested by Westerlund’s (Oxford Bull Econ Stat 69(6):709–748) cointegration test. Due to the presence of cross-sectional dependency, the study employed the cross-sectional autoregressive distributed lag (CS-ARDL) method to estimate the coefficients in the long and short run. The study also used a common correlated effect—mean group (CCEMG) estimator for robustness check. The findings of the study reveal that green energy and FDI positively contribute to green economic growth in the long and short run. The green technology also contributes positively to enhance green economic growth but only in long run. To accelerate green economic growth, G7 countries should incorporate policies promoting green energy and technology, while acquiring more foreign investments to ensure a sustainable development.