Modeling the linkage between climate-tech, energy transition, and CO2 emissions: Do environmental regulations matter?

Abstract

The transition from conventional energy to clean energy is the ultimate strategy to reduce global CO2 emissions. In this regard, climate technologies (climate-tech) can pave the way toward achieving the capabilities required to promote alternative energy and energy saving. In addition, environmental regulations can support technological upgrading, energy transition, and emissions reduction to promote sustainable development. With this in view, this study investigates the impact of climate technologies (climate-tech) and energy transitions on CO2 emissions in the European Union (EU) member countries. Further, we examine the role of environmental regulation in the relationship between climate-tech, energy transition, and CO2 emissions. The empirical analysis is conducted based on international panel data for 26 EU countries ranging from 1994 to 2019, and the Common Correlated Effects Mean Group (CCE-MG) method is employed to estimate the coefficients of the variables. The outcomes of the analysis indicate that both climate-tech and energy transitions mitigate environmental degradation by reducing carbon emissions. Additionally, environmental regulations are found to be an effective monitoring and controlling tool that can significantly reduce CO2 emissions. Moreover, economic growth and urbanization as control variables contribute to increasing CO2 emissions, thus negatively affecting environmental sustainability. The causal analysis demonstrates that decision-making trends related to climate-tech, energy transition, and environmental regulations influence CO2 emissions. Conversely, strategies for coping with CO2 emissions and climate change will affect energy transitions and environmental regulations. In light of these analytical findings, this paper proposes that EU countries should vigorously develop climate-related green technologies and actively promote the energy transition process along with the implementation of environmental regulations for sustainable development.