Economic policy uncertainty and the climate challenge: Moderating effects on the innovation–emissions nexus in G20 nations

Type of the article: Research Article AbstractThis study aims to examine the impact of technological innovation on the carbon emissions of the G20 economies while accounting for the moderating role of economic policy uncertainty. To analyze the relationship between emissions and technological innovation in the presence of economic vulnerabilities, the study used the annual data from 2000 to 2023. Panel and quantile regression are used to test the heterogeneous relationship. The results reveal that research and development expenditure (R&D) has a positive and statistically significant impact on emissions at certain quantiles, suggesting that innovation alone may not uniformly contribute to emission reductions. Economic policy uncertainty is documented to have a heterogeneous relationship with emissions, wherein it reduces emissions at lower quantiles, with a positive relationship exhibited at higher quantiles. Similar results are obtained when economic policy uncertainty and R&D interact and are able to reduce emissions at all levels, as shown by quantile regression. The results provide valuable implications for policymakers, emphasizing the importance of fostering innovation while managing policy uncertainty to achieve carbon mitigation goals across varying emission levels within the G20.