Abstract
Technological innovation in the energy sector is highly needed to reduce carbon emission costs, which requires knowledge spillovers, financial development, and carbon pricing to achieve a green developmental agenda. The current study examines the role of knowledge innovations in achieving the environmental sustainability agenda under financial development and carbon pricing in a panel of 21 selected R&D economies from 1990 to 2018. The study constructed a composite index of financial development and knowledge innovation in the carbon pricing model. The results show that carbon pricing, a financial development index, innovation index, and energy demand fail to achieve stringent carbon reduction targets. A U-shaped relationship is found between carbon emissions and per capita income in the absence of a financial development index and trade openness. At the same time, this study shows the monotonic decreasing function in the presence of all factors. The causality estimates confirmed the feedback relationship between carbon pricing and carbon emissions, carbon pricing and the financial index, and the financial development index and innovation index. Further, the causality results established the carbon-led financial development and innovation, growth-led carbon emissions, and trade-led emissions, pricing, and financial development in a panel of selected countries. The estimates of the innovation accounting matrix (forecasting mechanism) confirmed the viability of the environmental sustainability agenda through carbon pricing, knowledge innovation, and financial development over a time horizon. However, these factors are not achievable carbon reduction targets in a given period. The study concludes that carbon pricing may provide a basis for achieving an environmental sustainability agenda through market-based innovations, green financing options, and improved energy resources. This would ultimately help desensitize carbon emissions across countries.
Highlights
The 21st joint session of the Conference of the Parties (COP-21) binds the legal agreement among nations to limit global warming to below 2 ◦C through global action plans by 2100
The results show that CPRICE will exert a more significant influence on CO2 emissions with a variance error shock of 3.041%, followed by INOVINDEX, 2.912%, Financial Development Index (FDINDEX), 1.506%, GDPPC, 1.226%, and EUSE, 0.196%
This study examined the role of knowledge innovations, financial development (FD), and carbon pricing in achieving environmental sustainability agenda (ESA) by selecting a panel of 21 R&D-based economies from 1990 to 2018
Summary
The 21st joint session of the Conference of the Parties (COP-21) binds the legal agreement among nations to limit global warming to below 2 ◦C through global action plans by 2100. The dream of achieving sustainability in energy, agriculture, manufacturing, and services is promising to invest in ‘green economy’ projects at national and international levels. This is one way to limit GHG emissions by using the summit’s ‘climate fund’, which will decrease environmental resource depletion and achieve socio-economic objectives [1]. The public and private sectors may raise trillions of dollars as new investments to reach towards the COP-21 agenda; ‘pricing carbon’ seems like an opportunity to open the windows of innovation and cut emissions to derive a low-carbon future [2]. The new technological advancement, sustainable energy sources, renewable fuels, and climate-smart agriculture practices would give healthier alternatives to transform environmental policies to become more inclusive and beneficial [4,5]
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