The effects of environmental innovations on CO2 emissions: Empirical evidence from Europe

Abstract

Environmental innovations are key enablers of transition towards greener economies. Despite their importance, empirical studies examining the effect of green technologies on CO2 emissions are still limited. Using an autoregressive distributed-lag model (ARDL), we analyze the impact of environmental innovations, the consumption of renewable energies, GDP per capita, and degree of economic openness on CO2 emissions for 15 European countries over 23 years. Our results indicate that, in the long-term, environmental innovations tend to lower CO2 emissions, whereas in the short-term the observed effect is the opposite, suggesting the existence of a rebound effect. This study recommends introducing new policies that combine tools of environmental economics with those of ecological economy to integrate economic incentives with regulatory changes and encourage individuals to consume differently by favouring products and/or services with a less negative impact on the environment.