Investigating the Implications of Technological Innovations and Clean Energy in Carbon Neutrality in Tunisia

Environmental degradation poses a significant global challenge, compelling many nations to recognize the importance of financial development in driving the advancement of renewable energy. Urbanization also presents a critical opportunity for adopting sustainable energy sources. Against this backdrop, our study examines the impact of Tunisia’s financial development, clean energy initiatives, technological innovation, and urbanization on carbon neutrality from 1990 to 2020, using the ARDL model. We assessed both short-term and long-term dynamics through the Bounds test and employed the Granger causality test to explore the relationships among the variables. The ARDL bounds test confirmed a long-term connection between these factors. Our findings suggest that while clean energy and technological innovations significantly reduce carbon emissions in the short term, technological innovations alone lead to increased CO2 emissions in the long term. We conclude that to enhance environmental quality, Tunisia should further develop its financial sector, invest in green technologies, and accelerate the transition to renewable energy.