Path to Sustainability Transition: Can the Balanced Combination of Eco-Innovation, Foreign Investments, and Carbon Emissions Pave the Way for Economic Growth and Environmental Harmony?

Abstract

Abstract Environmental concerns have steadily caught attention as economic growth has developed more rapidly. Governments see technology revolutions, particularly eco-innovations and green technology transfer through FDI, as a solution to modern economic issues and climate change challenges. However, performing eco-innovation adoption separately from FDI is insufficient to solve environmental dilemmas and achieve economic growth and sustainable development goals. As far as we know, there is scarce knowledge about the spatial perspective and the impact of the combined mechanisms of eco-innovation, FDI, and carbon emissions in developing nations. This paper uses the geographic Durbin model based on spatial panel data to examine the combined effect of eco-innovation, carbon emissions, and FDI effects on economic growth in nine MENA countries from 2000 to 2019. The study results are as follows: (i) Eco-innovation, FDI, and carbon emissions positively and directly impact GDP; (ii) carbon emissions are the most critical driver that impacts economic growth; and (iii) the balanced combination of driving factors of economic growth positively and directly impacts GDP. Therefore, the balanced combination of carbon emissions with eco-innovation and FDI substantially affects economic growth, improves environmental quality, and embarks on a sustainable transition path. Policymakers must make more significant efforts to generate more robust green strategies and dynamic systems to endorse the transition to sustainability.