Patents on Environmental Technologies, Financial Development, and Environmental Degradation in Sweden: Evidence from Novel Fourier-Based Approaches

Abstract

This article seeks to capture the effects of patents on environmental technologies and financial development on environmental degradation in Sweden between 1995Q1 and 2019Q4 using Fourier ARDL and Fourier Toda Yamamoto (Fourier TY) causality approaches. In the estimated models, the control variables employed are economic growth and renewable energy. The Fourier ARDL long-run estimates indicate that: (i) both patents on environmental technologies and renewable energy have negative effects on environmental degradation; (ii) improvements in both financial development and economic growth positively affect environmental degradation. Finally, the Fourier TY estimates indicate that patents on environmental technologies, growth, and renewable energy have unidirectional causal effects on environmental degradation. These findings have significant policy implications, particularly for financial development and patents on environmental technologies in Sweden. The government of Sweden can enact strict regulatory policies to control the adverse impacts of financial development. In addition, the government can increase investments in patents on environmental technologies and renewable energy use to reduce carbon dioxide emissions (CO2E).