Repositioning green policy and green innovations for energy transition and net zero target: New evidence and policy actions

Abstract

A growing number of countries and organisations pledge net-zero emissions, yet climate change continues to drive biodiversity loss and extreme weather, causing devastation to communities. Wildfires, floods, and hurricanes claim lives, destroy homes, and disrupt livelihoods, while shifting climate patterns lead to agricultural failures and food shortages, worsening hunger. Our study examines the role of green policies and innovations in advancing the energy transition and achieving net-zero targets across 24 OECD countries. We employ three empirical strategies—standard specification, GMM dynamic estimation, and Quantile via Moment regression—while addressing endogeneity and cross-panel correlation through Hausman-Taylor and FGLS estimators. Our findings reveal that past carbon emissions exert a strong influence on current emission levels, underscoring the long-term impact of historical emission patterns. Green policies, innovations, renewable energy adoption, and inclusive human development all significantly contribute to reductions in carbon emissions, suggesting that tools such as green taxation and technological innovation are crucial for accelerating the transition to a low-carbon economy. However, the positive correlation between economic growth and fossil fuel dependence highlights the urgent need to decouple economic growth from environmental degradation. Reducing reliance on fossil fuels is imperative to addressing environmental challenges effectively. Therefore, prioritising sustainable policies and investments is essential not only for mitigating climate change but also for securing a resilient, low-carbon future.