Shaping Carbon Futures in the G7 : Socio‐Economic Dynamics, Policy, and the Growth‐Sustainability Nexus

Abstract

This study examines the socioeconomic, institutional, technological, and behavioral determinants of carbon dioxide (CO 2 ) emissions across the G7 countries over the period 2011–2024. Specifically, it investigates how self‐reported life satisfaction (SRLS), human development (HDI), total factor productivity (TFP), environmental policy stringency (EPS), government effectiveness (GE), and real expenditure per capita (REPC) are associated with CO 2 emissions while accounting for the nonlinear effect of HDI and the moderating role of household expenditure. Following diagnostic tests for slope heterogeneity, cross‐sectional dependence, stationarity, cointegration, multicollinearity, and model specification, the study employs the FE‐DKSE as the primary estimation technique, with PCSE and FGLS estimations used to assess robustness. The findings reveal that HDI is consistently associated with lower CO 2 emissions, while its significant quadratic term indicates a nonlinear relationship that does not support the conventional EKC hypothesis. EKC exhibits a positive association with CO 2 emissions, whereas environmental policy stringency contributes to emission reductions. Moreover, the SRLS × REPC interaction is positive and significant, suggesting that the association between life satisfaction and CO 2 becomes stronger as household expenditure increases. The robustness analyses confirm the stability of these relationships across alternative estimators. By integrating nonlinear human development effects and the behavioral interaction between subjective well‐being and household expenditure within a unified empirical framework, this study delivers updated and robust indications on the complex drivers of carbon emissions in advanced economies and contributes to a more inclusive understanding of the development–environment nexus in the G7 countries.