Re-evaluating the impacts of green innovations and renewable energy on carbon neutrality: Does social inclusiveness really matters?

Abstract

This study explores the impact of green innovation and renewable energy on carbon emissions, considering the mediating role of social inclusivity for a panel of 24 countries in the Organization for Economic Co-operation and Development (OECD) from 1994 to 2019. The empirical strategy is framed in a generalized method of moments dynamic panel, which is novel for assessing the short- and long-term relationships among the variables. By controlling for confounders, we assessed the mechanism by which green innovation and renewable energy contribute to carbon emissions. Furthermore, for consistency with prior empirical research, we extended the analysis using alternative statistical specification by Hausman-Taylor and the feasible generalized least squares, which controls for potential endogeneity issues and cross-panel correlation. Our results are relatively mixed: our analysis suggests that green innovation and economic growth are positive and statistically significant predictors of carbon emissions. However, renewable energy and social inclusiveness were both negative and significant predictors of carbon emissions. These results suggest that renewable energy and social inclusiveness can serve as remedies for promoting environmental quality and reducing carbon emissions in OECD countries. Therefore, we recommend promoting the expansion of renewable energy at a lower cost to unserved and underserved communities and promoting social inclusiveness to achieve a net zero emission target.