Green economic growth and environment: unveiling the role of environmental policy and cleaner energy in G-7 countries

This study explores the intricate interplay among cleaner energy, environmental policies, fiscal spending, trade and their impacts on green economic growth (GEG), and carbon dioxide emissions (CO₂e) in the G-7 countries from 1990 to 2021. It fills a significant gap in the current literature by utilizing advanced second-generation panel data analysis techniques, particularly the cross-sectionally augmented autoregressive distributive lag (CS-ARDL) technique. Primarily, it finds that environmental policy and cleaner energy correlate with reduced CO₂e levels, highlighting their crucial role in environmental protection and carbon mitigation. Contrarily, the study reveals a complex effect of fiscal spending, showing that its impact on CO₂e varies over short and long-term periods, potentially leading to environmental degradation. Additionally, environmental policy and cleaner energy adoption are linked with a boost in green growth, underlining their significance for sustainable development. The study’s results also support the theory that embracing eco-friendly technologies is crucial for sustaining and enhancing environmental quality. Furthermore, panel causality tests provide consistent results, supporting the argument for green growth and environmental sustainability advocacy among policymakers in G-7 countries. These insights offer a holistic understanding of the dynamics influencing environmental outcomes and present a factual rationale for informed policymaking.