A comparative study on the moderating impact of renewable energy and innovation on environmental quality

Abstract

This study explores the complex interactions between renewable energy production, innovation, economic growth, institutional quality, economic globalization, and CO2 emissions in OECD countries and emerging economies from 1996 to 2021. Results from Driscoll–Kraay standard error and feasible generalized least square reveal distinct trends: renewable energy production leads to increased CO2 emissions in emerging economies but significantly reduces emissions in OECD countries. Besides, residential and non‐residential innovation, along with total innovation, show similar effects. Notably, technology‐moderated renewable energy production effectively lowers CO2 emissions in both country groups. Similarly, economic growth enhances environmental quality in both sets of countries. However, institutional quality needs improvement in emerging economies, while current levels suffice in OECD nations to maintain environmental quality. Moreover, the study emphasizes the importance of considering globalization's impact on CO2 emissions, advocating for international agreements to leverage globalization for environmental benefits. Overall, these findings provide valuable insights for shaping renewable energy policies, fostering innovation, promoting economic growth, enhancing institutional quality, and harnessing globalization efforts to reduce CO2 emissions and enhance environmental quality