Decarbonization: examining the role of environmental innovation versus renewable energy use

Climate change resulting from a rapid increase in greenhouse gas (GHG) emissions is adversely affecting humanity. If the GHG emission continues to rise at the current pace, humanity will face severe consequences and reverse all the progress made. This paper, therefore, uses relevant data from 14 developing countries in Asia from 1990 to 2018 to examine the potential impact of environmental innovation on CO2 emissions by controlling globalization, urbanization, and economic growth. The number of environmental-related technology patents is used as a measure of environmental innovation. We employed a panel long-run regression model — FMOLS, PCSE, and FGLS to estimate the elasticity of CO2 emissions. For causal association among variables, we used Dumitrescu-Hurlin Granger causality tests. Our results show that renewable energy consumption and globalization have a significant impact in reducing CO2 emissions, while environmental technology innovations play a meager role in reducing emissions and only when economic growth support those type of investment. Furthermore, we found urbanization, oil consumption, and economic growth is detrimental to the environment, which is also evident in past studies. Therefore, countries should invest in renewable energy and environmental innovation aligned with the growth to reduce GHG emissions.