Do green policies achieve the carbon neutrality target? Revealing the effectiveness of environmental innovation

Abstract In recent decades, the Environmental policy and environmental innovation are becoming the central policy instruments aimed at carbon neutrality. This empirical study scrutinizes the role of environmental policy and eco‐innovation on CO 2 emissions for G7 countries. The study employs second‐generation panel data econometric methods along with panel quantile regression spanning from 1990 to 2019. The empirical findings infer that environmental policy and eco‐innovation significantly mitigate CO 2 emissions in the long run. While, panel quantile regression also infers that environmental policy is negatively significant in all quantiles, but eco‐innovation is negatively significant from the 40th to 70th quantiles and insignificant in all other quantiles. The estimated results may further reinforce the policymakers in G7 countries on the promotion of green policy and eco‐innovation in carbon neutrality targets.