Nexus Between Green Growth Drivers and CO2 Emissions: Insights from Panel Evidence of Environmentally Vulnerable Countries

Abstract

This study explores the long-term relationship between carbon dioxide (CO?) emissions and four dominant macroeconomic variables: technological innovation, green growth, economic growth, and financial globalization. It is based on panel data from ten environmentally sensitive countries for the period of 2000 to 2023. Firstly, panel unit root tests (LLC, IPS, ADF, and PP) tested the stationarity of the variables and established different orders of integration. Thereafter, a stable long-run equilibrium relationship was identified between the variables by Pedroni and Kao cointegration tests. Then Dynamic Ordinary Least Squares (DOLS) procedure was used to estimate these long-run impacts, which resolved endogeneity and autocorrelation problems and accommodated the inclusion of variables integrated at varying orders. Results revealed that technological innovation and financial globalization significantly lower CO? emissions, pointing to their mitigation potential in the environment. On the other hand, green growth and economic growth were positively correlated with emissions, reflecting continued dependence on energy-intensive development. Diagnostic tests confirmed the model's stability and consistency. These results underscore the importance of strategically designed policies that incorporate technological progress and financial openness with sustainable economic techniques to reduce environmental degradation.