The tug of war: will regulatory quality and green innovation outpace carbon emissions?

Abstract

The study investigates the effects of regulatory quality, green innovation, and their interaction on carbon emissions in 13 Asian countries from 1991 to 2022. The factors influencing emissions reduction in the region are investigated using PMG, GEE, Quantile regression, Panel Corrected Standard Errors (PCSE), and Two Step System Generalized Method of Moments (GMM) for robustness. The study considers the dual effect of regulatory quality and green technology in mitigating emissions and the social and economic factors of urbanization, foreign direct investment (FDI), and education level. We find that regulatory quality has a significant disincentive effect on carbon emissions. It highlights why strong governance frameworks matter for the promotion of environmental sustainability. green innovation significantly reduces carbon emissions highlighting its importance in long-term decarbonization strategies. Beyond that, GreInn*RegQ increases emissions reductions further, illustrating the need for policy soundness and coherence. Nevertheless, these factors have different effects across emissions quantiles, and high-emission economies are more likely to benefit from regulatory quality and green innovation synergies. For example, control variables like urbanization are positively related to emissions, while FDI helps decrease emissions by allowing clean technology to be transferred. The findings provide policymakers with actionable insights, stressing the need for context-specific, tailored strategies to ensure sustainable development and meet global climate goals.