Exploring the role of green investment, energy intensity and economic complexity in balancing the relationship between growth and environmental degradation

Embarking on a journey through the intricate dynamics of economic growth (GDPER) and environmental sustainability (CO₂P), this study delves into the pivotal roles of green investment, energy intensity, and economic complexity across thirty diverse economies from 2000 to 2022. Using advanced methodologies such as the panel autoregressive distributed lag model, augmented mean group, and the common correlated effects mean group, results of our study reveal that economic growth, energy intensity, and economic complexity positively and significantly affect environmental degradation, while green investment has negative and significant association with environmental degradation. Our findings further reveal that in the early stages of economic growth, increased GDP and energy intensity lead to increase carbon emissions. However, as economies grow further, green investment and advanced stages of growth help reduce carbon emissions, supporting the environmental Kuznets curve hypothesis. Dumitrescu–Hurlin (D-H) causality results show unidirectional causalities, heading from economic growth, green investment, energy intensity and economic complexity toward environmental degradation. Bi-directional causality exists between economic growth and square of economic growth. These results have significant implications for policymakers, emphasizing the need for flexible and adaptive policies that consider the changing environmental impacts at different development stages. Additionally, the study highlights the importance of large-scale green investment initiatives as a strategic approach to mitigating the negative environmental effects of economic growth.