Modelling the role of eco innovation, renewable energy, and environmental taxes in carbon emissions reduction in E−7 economies: Evidence from advance panel estimations

Carbon emissions are considered as the major factor of environmental deterioration which makes environmental sustainability vulnerable and risky. Global warming is a severe challenge for most of the economies and the emerging seven (E7) economies are not exempted from this challenge. However, the factors helpful for the carbon emission reduction remained understudied in E−7 economies in the previous literature. Therefore, our study intends to cover this literature gap by estimating the role of eco-innovation, renewable energy, and environmental taxes for E−7 economies over 1995–2018 period. For the purpose of analysis, the study employs three different cross-sectional dependence (CSD) tests, CIPS and CADF unit root tests, (Westerlund & Edgerton, 2008) cointegration analysis, novel long run coefficient estimation approaches of Continuously Updated Full Modified (CUP-FM) and Continuously Updated Bias-Corrected (CUP-BC), and Dumitrescu and Hurlin (2012) panel heterogeneous granger causality test. It is revealed from the findings that renewable energy, eco-innovations, and environmental taxes have positive contributions towards carbon emission reduction. Moreover, a feedback or bi-directional causal relationship is found to be present between afore-mentioned variables and carbon emissions. Finally, our findings are robust to different policy implications that are helpful to control carbon emissions and their damaging environmental impacts.