Relationship between innovation, renewable energy, GDP, and environmental sustainability: The case of Germany

This study examines the dynamic relationship between innovation (INN), renewable energy consumption (REC), gross domestic product (GDP), and environmental sustainability (ES) in Germany using a Vector Autoregressive model and Granger causality tests (GCT). The results reveal that a 1% increase in INN leads to a 0.35% rise in REC consumption, reinforcing the role of technological advancements in Germany's energy transition. Additionally, the Environmental Kuznets Curve hypothesis holds, as GDP initially drives CO 2 emissions upward but later contributes to a 0.28% decline in emissions beyond a critical income threshold. GCT confirm a unidirectional causal link from INN to REC, while variance decomposition shows that INN and REC jointly explain over 40% of the forecast error variance in CO 2 emissions. These findings underscore the importance of sustained policy support for green INN and REC adoption. Policymakers should prioritize R&D incentives and regulatory frameworks that accelerate the shift to sustainable energy systems while ensuring long-term economic growth.