Environmental policy stringency, related technological change and emissions inventory in 20 OECD countries.

Abstract

Since the parties to Paris agreement ink ambitious emissions reduction targets, there is a growing debate - whether the existing environmental regulations have potential to spur enough technological base that could help to achieve the targets by 2030? Thus, this study attempts to empirically investigate the role of stringent environmental regulations towards environmentally friendly technological innovation, carbon emissions, GDP, exports and imports for 20 OECD countries. The results find long-run equilibrium relationship among the variables and suggest that the current environmental regulations encourage green innovation in the panel countries. Furthermore, stringent environmental policies couple with environmentally friendly innovation are impetus to sustainable development. Exports and imports have little to contribute green innovation but, exports reduce carbon emissions in the short-run only and imports are emissions intensive. The study suggests that the OECD countries need to revisit trade related environmental regulations.