The integrated influence of energy security risk and green innovation on the material footprint: An EKC analysis based on fossil material flows

Abstract

The OECD community consumes excessive amounts of raw materials and materials, which leads to pollution and increases the material footprint. The material footprint is directly linked to the Sustainable Development Goals (SDGs)-8 and 12. The main reason for the material footprint is the usage of fossil fuels, and the dependence of OECD countries on fossil fuels continues to this day. By expanding renewable energy utilization due to rising energy security risk, a community can take steps to improve ecological quality and reduce its material footprint. In this context, the paper focuses to examine the impact of energy security, green innovation, economic policy stringency and income on the fossil fuel material footprint for 24 OECD countries over the period 1995–2018. To this end, the paper uses the Augmented Mean Group (AMG) method and novel Half Panel Jackknife (HPJ) causality and estimation approach. The study adds value to existing knowledge by empirically testing the determinants of fossil fuel material footprint for OECD countries for the first time using the novel HPJ approach. The results of the AMG show that increasing energy security risk index reduces the material footprint, while green innovation and economic policy stringency have no impact on environmental degradation. The environmental Kuznets curve (EKC) in the form of an inverted U and an inverted N are valid for OECD countries. The HPJ approach also illustrates that there is a causality from green innovation and energy security risk to material footprint, and innovation and risk are support footprint reduction. Based on these results, the study recommends that OECD policymakers pay attention to ensuring energy security to reduce the material footprint by expanding renewable resources and allocate more economic resources to green innovations with higher returns, considering the validity of the EKC.