Limiting greenhouse gas emissions in the organization for economic co-operation and development countries: The role of green innovation and national governance

Abstract

Governance and green innovation are essential factors in reducing greenhouse gas (GHG) emissions, a key objective in achieving sustainable development. This study aims to examine the effects of national governance and green innovation on GHG emissions in 38 OECD countries during the period 2002 - 2021, in the context of increasing environmental challenges. The study employs multiple panel data regression techniques, including the Ordinary Least Squares (OLS) regression model, the Fixed Effects Model (FEM), the Random Effects Model (REM), and the Feasible Generalized Least Squares (FGLS) model. Additionally, the authors conduct the Pesaran CD test to assess cross-country interdependence in pollution levels. To evaluate national governance, the study applies Principal Component Analysis (PCA) to synthesize six governance indicators: voice and accountability, political stability and absence of violence /terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption. The REM results indicate that green innovation has a statistically significant and positive impact on reducing GHG emissions. Furthermore, the Decision Tree Regression identifies trade openness, urbanization, and green innovation as the most influential factors in reducing emissions, while national governance appears to exert the least influence.

These findings suggest that although governance plays a supporting role, technological advancement and economic integration are more decisive in shaping environmental outcomes. This study contributes to the literature by integrating advanced regression techniques and multi-dimensional governance indicators, thereby offering empirical evidence to support the formulation of effective policy frameworks that promote green innovation, enhance environmental quality, and foster sustainable development.