Environmental governance, green finance, and mitigation technologies: pathways to carbon neutrality in European industrial economies

This study intends to analyze the impact of environmental governance (EGOV), green finance (GFN), and mitigation technology on industrial output (IVA) and carbon neutrality (CN) in six major European industrial economies. It further analyzes the influence of several critical variables, including environmental policy (EPY), energy efficiency (EEF), and renewable energy consumption (RENG), on achieving these objectives. The period from 2003 to 2022 is used for empirical analysis conducted using advanced econometric methodologies, such as the Pooled and Augmented Mean Group (PMG, AMG) estimators. Findings show that EGOV, GFN, and mitigation technologies related to production (MTPP) and energy generation (MTEG) have positive effects on IVA and contribute to CN when used independently. Meanwhile, the interactive terms MPRE (MTEG*RENG) and EPRE (EPY*RENG) have even stronger positive effects on achieving CN in selected European countries. It was also found that EPY and EEF have positive effects on CN. In contrast, IVA and demand-based emissions (DBE) have a negative impact on CN. These outcomes highlight the need for an integrated policy framework that encompasses governance reform, green financial investment, and technological innovation to achieve sustainable industrialization and the CN in Europe.

Graphical abstract