Green Innovation and the Decoupling of Economic Growth from Carbon Emissions: Evidence from Multi-Country Panel Data

Abstract

This study examines how Green Innovation (GI) affects the decoupling of economic growth from CO2 emissions using a multi-country panel dataset for 2012-2023. The analysis extends the Environmental Kuznets Curve (EKC) framework by including GI as both a direct explanatory variable and a moderator in the growth-emissions nexus. Fixed-effects estimation with Driscoll-Kraay standard errors was used to account for heteroskedasticity, serial correlation, and cross-sectional dependence. The results indicate an inverted-U-shaped relationship between income and emissions, but the estimated turning points are not uniformly distributed across the observed income range. GI significantly reduces emissions in high-income countries. In contrast, its effect remains weak in middle- and low-income groups, where absorptive capacity, institutional quality, and energy structure constrain its environmental effectiveness. The interaction term shows that GI attenuates the emissions-intensive effect of growth. The findings imply that innovation policy must be differentiated by development stage rather than treated as a universal decoupling instrument.