Nexus between technological innovation and environmental pollution in selected OECD countries

Abstract

Addressing environmental pollution is fundamental to establishing sustainable development across the globe. While navigating the Fourth Industrial Revolution, it is of critical relevance for economies worldwide to come up with innovative measures that can withstand the factors driving environmental pollution. On that note, this study explores the technological innovation‐environmental pollution linkages in the context of 10 members of the Organization for Economic Cooperation and Development (OECD) using data spanning from 1994 to 2018. Notably, considering ecological footprints as the environmental proxy, the analysis controls for the corresponding levels of economic growth, financial development, and renewable energy consumption in the concerned countries. In addition, the long‐term estimates are investigated using Augmented Mean Group, Common Correlation Effects Mean Group, Fully Modified Ordinary Least Square, and Dynamic Ordinary Least Square techniques while the causality relationship is determined by Dumitrescu‐Hurlin panel bootstrapped causality test. The results establish the long‐term cointegrating linkages among the variables considered. It is also observed that economic growth increases the ecological footprint level, while technological innovation, renewable energy consumption, and financial development reduce it. Moreover, the results reveal that technological innovation and ecological footprint causally influence each other, while there are one‐way causalities moving from economic growth and financial development to ecological footprint. Furthermore, a two‐way causality concerning renewable energy consumption and ecological footprint is also detected. Considering these results, it is pertinent for the selected OECD countries to improve energy efficiency rates, scale investment for developing the renewable energy sector, and execute policies that support investments in initiatives concerning low‐carbon technological development. Additionally, these countries should look to implement policies that are compatible with the objectives of establishing green growth so that low‐emission development can take place to tackle climate change‐related problems.