1. Introduction
Global warming is seen as a serious threat to the global environment, according to growing sentiment across nations throughout the world. Most individuals believe that human emissions of hazardous gases such as carbon dioxide (CO2) are the primary reason for the rise in global temperatures that are hurting humans and the natural environment [
1,
2]. Thus, it is necessary to identify the factors that are helpful in mitigating CO2 emissions and their adverse impact on the natural environment. As the detrimental effects of environmental harm, such as climate change and global warming, became more apparent on a worldwide scale, governments began to seek a common approach, and several discussions on environmental sustainability were organized on both national and international forums. Owing to rising pollution, global temperatures have risen 1.9 degrees Fahrenheit as of 1880, sea levels have risen 178 mm in the last hundred years, and carbon dioxide (CO2) emissions have risen to 413 parts per million, the most in 650,000 years.
Concerning such environmental damages, actions such as the Paris Agreement (2016) compel all countries to reduce emissions to some extent, while also contemplating methods and policies to assist humanity in the adaptation to changes in climate. Consequently, the causal factors of emissions, particularly carbon emissions, have piqued the interest of scholars, with evidence pointing to population increase [
1], energy utilization [
1,
2], human resources [
3], urban growth [
4], trade openness [
5], financial sector growth [
6]), natural resource rent [
7], and research and development [
8] as the crucial factors of carbon emission, among others. Carbon emissions reductions are advantageous because they have addressed an urgent worldwide challenge of reducing environmental deterioration, which has an impact on human growth and well-being. Constraining economic activity, in contrast, is unsustainable in the long-term. As a result, it begs the question of whether policymakers could combine growth strategies with low-carbon plans to assure that society’s growth is optimum, effective, and long-term.
Figure 1 below shows the Asian region as the top emitter in the world for the last two decades, recording 16778 million metric tons CO2 emissions in 2020, whereas North America and Europe remain the second and third largest emitting regions, respectively.
Among other remedial measures, innovation is thought to be the most effective technique for reducing CO2 emissions, conserving energy usage, and promoting economic growth [
9]. Despite economic activities driving the demand for the utilization of power sources, which increases CO2 emissions, innovative activities drive energy combustion efficiency, improve market efficiency, and reduce market imperfections chain. The production line, improvements in fuel supply, the deployment of end-to-end pipeline technology, as well as other technical developments to manufacture sustainable product units and cycling have been proven to promote global market efficiencies and reduce carbon emissions [
10].
Moreover, the beneficial influence of renewable energy on ecosystems is frequently acknowledged within those works of literature on the Environment Kuznets Curve (EKC) hypothesis [
11]. Countries concentrate on environmental protection in the adaptation and mitigation strategies of climatic changes, with renewable energy playing a key part. Investment in renewable energy (green investment) is more effective than in non-renewable energy since it increases the production capacity of energy sources and the dependence of the manufacturing sector on clean energy, which reduces both manufacturing emissions and energy usage. However, in developing countries, particularly in transformation, the overall rise in energy consumption will grow by 50 percent in the coming 25 years and increase in the industrial sector where it will rise from 1.8 to 3.1 percent (United Nations Industrial Development, 2020). Further, the industry may cut energy intensity by 26%, resulting in an 8% reduction in world energy consumption as well as a 12.4% reduction in carbon emissions (International Energy Agency, 2020). In agreement with the dependency of the industrial sector on energy consumption, green investment in the manufacturing sector not only helps to alleviate energy supply shortages in developing nations, but it also helps to boost economic growth and reduce carbon emissions. Although the industrial sector is a key driver of the economy and hugely dependent on energy consumption, the influence of green investment on CO2 emissions has been largely ignored by prior researchers.
Countries are constantly confronted with dual challenges of supporting economic growth while also combating environmental issues, and this is obviously valid in the context of Asian countries. In 2019, Asian economies as a whole expanded at an average pace of 5% GDP growth, then after a decline to −0.2% in 2020 due to the COVID-19 pandemic, the region is expected to see 7.3% and 5.3% GDP growth, respectively, in 2021 and 2022 (Asian Development Bank, 2020). However, securing its recognition as the world’s fastest-growing economic region, fossil fuel consumption accounts for almost 85% of Asian’s regional energy needs. This has led to concerns that the increasing growth exhibited by these economies, backed by increased levels of energy usage, may be leading to greenhouse gas emissions and climate disruption [
6,
12,
13]. The share of Asian countries to globally emitted CO2 is 52%, out of a total 16,778 million tons of carbon emission, with 9899.3 million tons emitted by China and almost 2302.2 million tons of CO2 emissions added by India in 2020 (BP Statistical Review of World Energy, 2020), putting the Asian region in first place globally in terms of greenhouse gas emission.
Figure 2 shows the share of major Asian countries in CO2 emissions for the last two decades, revealing China and India constantly rank first and second as the largest emitters of CO2 in the region. respectively.
Among Asian countries, the present study focused on eleven countries: China, Bangladesh, Indonesia, India, South Korea, Malaysia, Pakistan, Philippines, Sri Lanka, Thailand, and Vietnam. From these countries, China and India are two of the world’s leading emitters of greenhouse gases and leading trading economies. In 2019, China accounted for almost 28.6% of the global manufacturing output, securing its position at number one, and similarly, India, South Korea, and Indonesia are respectively at 5th, 6th, and 10th in the largest producers of global manufacturing output with 3.1%, 3.0%, and 1.6% shares, correspondingly, according to United Nations Statistics. Likewise, China, India, and Pakistan are among the top five most-populated countries of the world. Thus, as a result of rising economic growth, industrialization, population growth, and urbanization, the energy requirements in these regions are also rapidly increasing, and these achievements are also reliant on primary energy usage, mostly fossil fuels, which are seen to be highly polluting and less efficient. Given the foregoing, the apparent solution to this dilemma in Asian countries is to incorporate advanced technologies and transfer from fossil-based resources to renewable resources. Moving to a low-carbon economy not only resolves power management and social health concerns, but also innovates the country’s industrial base, assuring long-term economic prospects, while also assisting in the achievement of the Paris Agreement’s ambitious objective of curbing carbon emissions by 60–65 percent by 2030.
The current study employed the most recent available data of eleven Asian economies for the period of 2001 to 2019 to examine the influence of green investment, technology innovations, and economic growth on CO2 emissions. Besides accounting for the most recent statistics, our study contributes to the existing literature is three ways. First, it determines the consequences of CO2 emissions from green investment (investment in renewable energy) using a supply-side channel of renewable energy, whereas the previous research has mostly concentrated on the relationship between renewable energy usage and CO2 emissions for Asian nations. Therefore, this is likely to provide new insight to examine the impact of green investment (supply-side channel of renewable energy) on CO2 emissions of selected countries. Secondly, as the Industrial Revolution era resulted in the significant influence of technology innovations on both enhancing economic growth as well as abating environmental damages, we also determined the impact of technological innovation on CO2 emissions in selected countries. Very few studies have already examined the influence of technological innovation on environmental quality in Asian economies; however, they mostly used R&D activities, energy efficiency levels, and eco-innovations as proxies for technology innovations. Conversely, we used the total amount of patent applications to measure technological innovations, as patent applications are seen to be a more-precise proxy for technological innovations and account for the overall technological development of an economy, not only in the energy sector. Lastly, our study provides a systematic theoretical foundation for integrating the explanatory variables in the model for empirical estimation and also used the most consistent and modern econometric techniques for panel data estimation.
The remainder of the current study is structured subsequently;
Section 2 provides prior empirical evidence of the topic;
Section 3 describes the methodology and data; next,
Section 4 explains the estimated outcomes; and
Section 5 concludes the whole study and provides several policy points.
5. Conclusions and Policy Suggestions
Environmental concerns of achieving long-term economic growth have serious consequences on human wellbeing, specifically in countries on the track of development. The overutilization of resources in these economies to improve the economic condition of the masses is causing severe harm to environmental sustainability, such as increasing the level of CO2 emissions over time. To address these issues, technology innovations and a shift towards renewable energy as the means of production appears to be an assured way to curb these rising global threats. Thus, our study explored the influence of green investment, technology innovations, and economic growth on CO2 emissions in the context of eleven selected Asian economies for the period 2001 to 2019. The study applied the CSD test to examine the cross-section dependency, CIPS and CADF tests to ascertain the stationarity level of the variables, the Westerlund cointegration test for confirmation of the long-term nexus among variables, and finally, PFMOLS and PDOLS to attain long-term coefficients of independent variables. First, the CSD test confirmed the presence of cross-section dependence, and similarly, the stationarity at the first difference was confirmed by CIPS and CADF tests for all variables, while the Westerlund cointegration method indicated the existence of long-term relationships between variables. The outcomes of PFMOLS and PDOLS indicated the negative and significant influence of green investment and technology innovations, as well as a positive significant influence of energy consumption (fossil fuel based), population growth, trade, and FDI inflow on CO2 emissions in the sample countries. The results regarding economic growth indicate an inverted U-shape relationship between economic growth and CO2 emissions, confirming the EKC concept, as GDP was found to have a positive influence while the square term of GDP was found to adversely affect CO2 emissions. Similarly, the FDI–CO2 emissions nexus validated the presence of the “pollution-haven” hypothesis in selected Asian countries. The outcomes of our study were proven to be valid and robust by applying the Granger Causality test, as well as AMG and CCEMG tests.
Based on the empirical findings, our study recommends suggestions to lower CO2 emissions. The governments in selected countries may continue to deepen their ties with developed countries that are at the forefront of technology innovations, meanwhile expanding their reliance on and investment in renewable energy resources and technological innovations. Governments should proactively encourage low-carbon technology innovations that are critical to Asia’s transition to a low-carbon region. Furthermore, we emphasize the optimistic influence of sustainable development in reducing carbon emissions, considering CO2 emissions in economic growth from the perception of long-term development rather than short-term actions, and fully realize Asia’s low-carbon transition in the economic development process. Besides, in order to mitigate the negative impacts of trade openness and FDI inflows on environment quality, more industries with eco-friendly production techniques must be targeted, since this would encourage knowledge transfer from clean technology to various sectors of the economy.
The prime limitation of this study is that it employed the data of only 11 Asian countries due to the data availability of the considered variables. Future possible research can be conducted by including a sample of other regions or panel-groups such as developed and developing countries for more interesting and comparative findings. Furthermore, we used PFMOLS and PDOLS to estimate the coefficient, and non-linear and threshold analyses can be conducted to check the possible non-linearity in the sample. Similarly, future researchers can incorporate other indicators in the model such as financial innovations, research and development expenditures in renewable energy, global value chain, and urbanization, which can possibly reduce CO2 emissions.