The role of innovation in the transition to a green economy: A path to sustainable growth

Abstract

The EU has set ambitious targets for carbon neutrality, encapsulated in the European Green Deal. This framework aims to transform the EU into a modern, resource-efficient, and competitive economy with no net emissions of greenhouse gases by 2050. Innovation plays a critical role in developing the technologies and processes required to meet these targets. This study investigates the influence of innovation on green economic growth across EU member states over the period 2007–2022. Employing the PVAR model with GMM estimation to analyse panel data from the Visegrad Group (V4), which includes Poland, Hungary, Slovakia, and the Czech Republic, this research explores the dynamic interplay between innovation activities and green economic growth. The MalmquistLuenberger index is constructed to evaluate green economic growth. According to the empirical results, there is a significant divergence trend in green economic growth among V4 countries. However, overall progress has been made in green economic growth, driven primarily by advancements in technology. Furthermore, the results reveal a statistically significant and positive relationship between innovation and green economic growth, highlighting the indispensable role of technological advancement and sustainable practices in the EU's progression towards a greener economy. The study recommends tailored policy interventions to optimize the benefits of innovation across the region.