Does environment-biased technological progress reduce CO2 emissions in APEC economies? Evidence from fossil and clean energy consumption

Abstract

Environment-biased technological progress plays a critical role in carbon reduction, while the association among environment-biased technological progress, energy consumption, and carbon emissions has not been paid enough attention. Working with a unique spatial panel dataset of APEC economies spanning the 2000-2017 period, we employed the nonspatial panel model and the spatial panel model to investigate the role of fossil energy (FE) and clean energy (CE) consumption in carbon dioxide (CO₂) abatement through environment-biased technological progress (EBTP). We decomposed EBTP into both emission-reducing biased technological progress (ErBTP) and energy-saving biased technological progress (EsBTP). The results show that the direct effect of EBTP on CO₂ emissions was significantly negative and that the direct effect of ErBTP was significantly larger than that of EsBTP. EBTP reduced CO₂ emissions through CE consumption, whereas it increased CO₂ emissions through FE consumption, that is, EBTP had a "backfire effect" on FE consumption. More into detail, ErBTP had a larger effect on CO₂ emissions in developing economies, while EsBTP played a more important role in developed economies. Furthermore, the results of the robustness test were consistent with our findings. Finally, several policy options were suggested to reduce CO₂ emissions in APEC economies.

Keywords: CO2 emissions; Clean energy; Counterfactual simulation; Environment-biased technological progress; Spatial panel model.