An econometric study of eco‐innovation, clean energy, and trade openness toward carbon neutrality and sustainable development in OECD countries

Abstract

International entities have highlighted the issue of climate change and global efforts toward becoming carbon neutral by 2050. Given the current emphasis on Agenda 2030 and the commitment to achieve net zero emissions, this study lures motivation from the United Nations sustainable development goals (SDGs) of access to affordable clean energy, innovation, sustainable economic growth, sustainable consumption, and production to avert climate change. To this end, this study assesses the role of eco‐innovation, clean energy, trade openness, human capital, and economic growth toward carbon neutrality and sustainable development in Economic Cooperation and Development (OECD) countries. The study utilized regression models to analyze the relationship between the variables. The study findings show that eco‐innovation, clean energy utilization, and human capital have a negative impact on CO2 emissions. Trade openness and economic growth have a positive impact on CO2 emissions except that trade impact is insignificant. The results of the causality test show bidirectional causality between eco‐innovation, energy utilization, trade openness, and CO2 emissions as well as a one‐way causality from trade and economic growth to CO2 emissions. Moreover, the impulse‐response and variance decomposition analysis results show that human capital and clean energy will be the key drivers contributing to the reduction of carbon emissions in the future while eco‐innovation, trade openness, and economic growth will steadily increase CO2 emissions. The study proposes expanded development of eco‐innovation and utilization of clean energy sources to curtail CO2 emissions and achieve SDGs.