Innovation as a shortcut to decarbonization: Evidence from emerging markets beyond the environmental Kuznets Curve

Abstract

Arising carbon emissions and accelerating industrialization have intensified concerns regarding sustainable development in emerging markets. This study examines whether innovation functions as a direct mechanism for decarbonization and whether innovation-driven environmental dynamics follow the Environmental Kuznets Curve (EKC) framework. Using panel data from emerging market economies over the period 2000–2020, the study applies fixed-effects estimation techniques to investigate both the linear and nonlinear effects of innovation on CO₂ emissions. Innovation is measured through research and development (R&D) expenditure, while industrialization, urbanization, trade openness, financial development, and ICT indicators are incorporated as control variables. The findings demonstrate that innovation significantly reduces CO₂ emissions, suggesting that technological advancement supports environmental sustainability through cleaner production systems and efficiency-enhancing mechanisms. However, the analysis does not support the existence of an innovation-driven EKC, as the nonlinear innovation term remains statistically insignificant. The study contributes to environmental sustainability literature by extending the EKC framework beyond conventional income-centered explanations and positioning innovation as a direct decarbonization mechanism in emerging economies. The findings further provide practical implications for policymakers seeking to accelerate low-carbon transitions through innovation-oriented industrial and technological policies.