Interdependency and causality between green technology innovation and consumption-based carbon emissions in Saudi Arabia: fresh insights from quantile-on-quantile and causality-in-quantiles approaches.

Abstract

In this paper, we examined the asymmetric dynamics and causality of technological progress--proxied by green technology innovation--on both consumption-based carbon (CCO2) and territory-based carbon (TCO2) emissions in Saudi Arabia using quarterly data from 1990Q1 to 2021Q4. Our initial results reject the normality and linearity assumptions of data series and thus emphasize that the observed associations are quantile dependent. We firstly utilized the quantile-on-quantile regression (QQR) approach to draw the interdependency between green technology innovation and both CCO2 and TCO2 emissions. We found a strong emission-mitigating impact of green technology innovation only at (extreme) upper emission levels. We also identified a weak positive effect at (extreme) higher emission quantiles. Furthermore, we found that higher emission levels are linked with lower green technology innovation across all emission quantiles whereas a weak positive effect is perceived at lower and medium emission quantiles. We further utilized linear and nonlinear Granger causality-in- quantiles (GCQ) tests to capture an entire picture of the impact of green technology innovation on both CCO2 and TCO2 emissions. Under linear specifications of the quantile regression model, we found evidence of strong bidirectional causality between carbon emissions and green technology innovation across lower and upper quantiles. However, we found unidirectional causalities from carbon emissions to green technology innovation at medium quantiles of the conditional distribution. Besides, there is no causality at both extreme lower and extreme upper quantiles. Under nonlinear specifications of the quantile regression model, we found a weak unidirectional causality from green technology innovation to carbon emissions at (extreme) lower quantiles. We also found a weak unidirectional causality from carbon emissions to green technology innovation at medium and extreme upper quantiles. Overall, our findings indicate that green technology innovation helps abate both CCO2 and TCO2 emissions in Saudi Arabia. Our study shows policies that target green technology innovation would significantly change carbon emissions.