Pathways to carbon neutrality in G7 economies: The role of technology-innovation and R&D in reducing CO2 emissions

Abstract

Implementing technological advancements plays a pivotal role in attaining carbon neutrality, a goal that seeks to diminish net carbon emissions to a state of equilibrium effectively. While numerous studies have been conducted on this subject, only a few recognize the unique contribution of technology, research, and development (R&D) in mitigating carbon emissions (CO2E). The current study examines the significance of technology innovation, R&D, and renewable energy consumption (REC) in mitigating CO2E. To this end, we examine the linkages between variables for the seven countries (G7) group from 1990 to 2020. The long- and short-run Cross-Sectional Autoregressive Distributive Lag (CS-ARDL) results confirm a consistent and stable association between technology innovation, R&D, REC, and CO2E. Both in the short- and long-run, economic growth and industrial value add increase CO2E, while technology innovation, R&D, and REC are all supportive of reducing CO2E. We applied the Common Correlated Effect Mean Group (CCEMG) model for the robustness check, which verified the CS-ARDL model's empirical results. However, the impact of long-run coefficients for R&D, economic growth, and REC is higher in the CS-ARDL model. In contrast, the coefficient of technology innovation is higher in the CCEMG model. In addition, the findings obtained from Dumitrescu and Hurlin's (DH) tests indicate that policies to target technology innovation, human capital, and REC significantly influence variations in CO2E and vice versa. On the other hand, policies for changes in R&D, economic growth, and industrial structure cause deviation in the intensity of CO2E but not vice versa. The current findings would provide practical insights and a policy adaptation framework for policymakers that are helpful for carbon neutrality and sustainable economic development.