The impact of eco-innovation and economic growth on carbon emission: Evidence using novel QARDL approach

Abstract

High economic growth in fast growing country like China is not without its environmental repercussions and eco- innovations have been promoted as a successful strategy for striking a balance between environmental performance and economic growth. However, there has not been much focus on how eco-innovation affects the performance of carbon emission in China. This study estimates the impact of eco- innovation on CO2 emission under the Environmental Kuznets Curve (EKC) hypothesis over the 1986–2022 period. To estimate the nexus empirically, we applied Quantile ARDL (QARDL) approach. The results of the research reveal that eco-innovations have significant yet negative effect on CO2 emission at all quantiles (0.05–0.90). Economic growth is linked positively with carbon emission over 0.05 to 0.70 quantiles, whereas its square impacts CO2 emission negatively and significantly at 0.60 to 0.95 quantiles. These findings confirm that EKC hypothesis exists in China. The findings in short run find that eco-innovations had negative impact on carbon emission, whereas in case of economic growth it shows positive connection, however, the GDP sq. shows negative linkage. On the basis of these results, the research recommends Chinese authorities to promote eco-innovations by providing influential incentives to households and business sectors to eliminate the negative trends of economic growth on environment. In addition, the study recommends that “renewable energy law” needs be implemented by institutions to encourage the renewable energy use in all sectors that is proved to have positive environmental impacts for China.