Estimating the Effects of Economic Complexity and Technological Innovations on CO2 Emissions: Policy Instruments for N-11 Countries

Abstract

Every year, the problem of environmental degradation becomes more severe globally. It is widely believed that technological innovation and economic complexity are understood as structural transformations toward a more sophisticated and knowledge-based means of production as a viable way to fight against climate change. However, the studies integrating these two elements into the same environmental policy framework are still scant. With this in view, this study investigates the dynamic linkage between economic complexity, technological innovations, economic growth, and nonrenewable energy on CO2 emissions in the N-11 nations. This study uses data from 1980 to 2020. It applies the recent method of cross-sectional autoregressive distributed lags (CS-ARDL). The cointegration method shows a strong association among the variables. The findings of the CS-ARDL show that technological innovations are negatively related to environmental degradation, while nonrenewable energy deteriorates the environment by escalating CO2 emissions. This study fails to validate the EKC in the N-11 nations. In addition, economic complexity is helping these economies to achieve environmental sustainability by lowering environmental pollution. Based on the findings, this work recommends that the N-11 countries restructure their industrial sectors with low-carbon energy sources. For this purpose, these countries should increase their research and development budgets. This will help in launching environmentally friendly energy sources in their economic development model.