Asymmetric Impact of Green Innovation and Taxation on Environmental Sustainability in Developing Countries

In developing countries, economic and technological advancements have led to macroeconomic volatility. This emphasizes how traditional linear estimation methods must take nonlinearity into account. Thus, using data from 1995 to 2019, this study investigates the asymmetric impact of green innovation and green taxation on environmental sustainability in developing countries. This is the first research to identify both symmetric and asymmetric links between these variables using the PMG-ARDL and NARDL models. The results imply that positive shocks in green innovation and green taxes encourage environmental sustainability by lowering carbon emissions. However, negative shocks from green innovation and green taxes seriously compromise sustainability by increasing emissions. This asymmetric impact is confirmed by the Wald test which shows that distinct effects on environmental sustainability in developing countries are attributed to both positive and negative shocks. The research also reveals that trade openness favorably improves environmental sustainability, but urbanization has a deleterious effect. These insights suggest that policymakers should take into account the asymmetric impacts of green innovation and taxation when devising environmental policies and allocating resources.