Managing Low Carbon Emissions: Investigating the Role of Environmental Stringency Policies and Environmental Friendly Technological Innovations on Carbon Emissions: Empirical Insights from Group Seven Economies

Abstract

For every country around the world, it is the foremost preference to mitigate the negative effects of environment and promote environmental sustainability without hindering economic growth. In doing so, government utilized environmental friendly policies that promote environmental related technological innovations. Strict and good environmental policies will encourage peoples to adopt environmental friendly technologies and diminish the environmental threatens. So, this study was under taken to explore the role of environmental stringency policy and environmental related technologies on carbon emissions in G7 economies by utilizing panel data from 1990 to 2024. With the best of our knowledge, this is the first study to investigate the efficiency of environmental stringency policy along with environmental related technologies on carbon emissions in G7 economies. For this purpose, the study utilized PMG-Autoregressive Distributed Lag method. The study finds out negative effects of environmental stringency policy and environmental related technologies on carbon emissions. This indicate that, strict and good environmental policies will encourage peoples to adopt environmental friendly technologies and diminish the environmental threatens. Further, the study supports the existence of EKC hypothesis in G7 economies with the positive effects of GDP and negative effects of GDP2 on carbon emissions. This indicates the inverted – U-Shaped relationship between GDP and carbon emissions. Moreover, research and development have also reducing carbon emissions with its negative role. Conversely, FDI increase carbon emissions with its negative influence on carbon emissions. For causal association among considered parameters, the study applied Panel Granger Causality Test and confirms that there exists bidirectional relationship among considered parameters. Moreover, for the validity and reliability of the PMG-ARDL findings, the study also utilized Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) and findings confirm that, the PMG-ARDL findings are robust, valid and reliable. On the basis of the empirical findings, the study has sizeable policy implications regarding the considered economies. It is suggested that, the governments of G7 economies should specifically work to modify all relevant laws and provide subsidies for initiatives like the adoption of green practices in order to encourage environmental sustainability and environmental related technologies.