The role of green technology on carbon emissions : does it differ across countries' income levels?

Abstract

This study examines the impact of green technology on CO2 emissions in a sample of 45 countries for 1989–2018. Renewable energy consumption and environmental-related patents are used as indicators of green technology. We consider the production of renewable energy and the development of climate-related innovation as ‘two sides of the same coin’. One needs to be complemented by the other for countries to be successful in the fight against climate change. After applying the fixed-effect method with Driscoll and Kraay standard errors, results reveal that renewable energy consumption significantly reduces CO2 emissions in the full sample and all three subsamples (High-income, Upper-middle-income, and Lower-middle income countries). However, environmental-related patents significantly lower CO2 emissions only in very high-income countries. This paper also analyses how CO2 emissions influence the development of green technology and carbon-intensive technology. A negative association is found between renewable energy and CO2 emissions in the high-income and upper-middle-income groups. Environmental-related patents respond positively to carbon emissions only in high-income countries. The results allow us to draw important conclusions for energy policies. Among the necessary measures to be adopted, developing countries should not neglect the promotion of green innovation, which is a critical condition for carbon neutrality achievement.