Assessing the new financial and regulatory dimensions of environmental sustainability: The role of financial stability, environmental taxes, and policy stringency in driving green technology adoption

Abstract This paper examines the effects of financial stability, environmental taxes, and policy stringency on green technology adoption in 33 OECD countries from 2000 to 2021. Using a two-step system GMM approach, the study explores short- and long-term relationships. The findings reveal that financial stability and stringent environmental policies significantly promote the adoption of green technology. In contrast, environmental taxes appear to be ineffective in driving this transition. These results are robust, confirmed through the Method of Moment Quantile Regression (MMQR) approach, demonstrating consistency across different quantiles. Causality analysis further affirms the findings, highlighting the crucial role of financial stability and strict policies in improving environmental outcomes. This research underscores the importance of integrating financial and environmental strategies to foster sustainable growth and green technology adoption.