Work

Driving carbon neutrality in the world’s top polluters: The critical role of green finance, innovation, and economic stability through advanced econometric analysis

Year: 2025

Type: article

Abstract: Despite ambitious global frameworks like the Paris Agreement and COP26 commitments, progress toward achieving carbon neutrality remains inadequate, especially among the top 25 carbon-emitting nations. This study addresses the research gap in understanding how green finance, economic uncertainty, and innovation jointly influence environmental sustainability and load capacity efficiency. Specifically, it explores the extent to which green finance fosters decarbonization, how economic policy uncertainty impedes environmental outcomes, and the role of technological and environmental innovation in enhancing carbon efficiency. Employing a novel integration of the Environmental Kuznets Curve (EKC) framework with Inverted Load Capacity Factor (ILCF) metrics, which measures structural efficiency by comparing a structure's self-weight to its maximum supported load capacity. The study applies Method of Moments Quantile Regression (MMQR) and Dynamic Seemingly Unrelated Regression (DSUR) to panel data from 2000 to 2022. The results reveal that green finance significantly reduces CO₂ emissions and improves energy system resilience, while economic uncertainty negatively impacts both emission reduction efforts and ILCF. Technological and environmental innovation emerge as pivotal drivers of sustainable transitions, especially in high-emission scenarios. Notably, the study provides nuanced policy insights by demonstrating the heterogeneous effects of these variables across quantiles and national contexts. This research contributes a unique empirical framework linking green finance, uncertainty, innovation, and sustainability outcomes, offering actionable implications for policymakers aiming to achieve net-zero goals under economic volatility.

Source: Environmental Challenges

DOI: 10.1016/j.envc.2025.101282

Author: Md Qamruzzaman

Institution: United International University

Language: English

Topic: Energy, Environment, Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $2,140