Economic growth, technological innovation and CO2 emissions in developed countries: Is there an inverted U-shaped relationship?

Purpose This study examines the role of technological innovation in shaping the relationship between economic growth and CO2 emissions in 19 developed countries from 2007 to 2020. It focuses on the environmental implications of economic expansion and explores how innov-ation can support sustainable growth by reducing energy consumption and improving efficiency. Design/methodology/approach A threshold model is used to assess the non-linear relationship between CO₂ emissions and economic growth, with climate change acting as the threshold. Beyond a certain level of environmental degradation, further economic growth leads to worsening environmental quality. The analysis also investigates the interplay between foreign direct investment (FDI), innovation and environmental outcomes. Findings The study confirms the existence of an inverted-U relationship, where early-stage economic growth in developed countries relies on energy-intensive industries, driving up CO2 emissions. However, as technological innovation strengthens, it supports both economic growth and environmental improvements. While FDI stimulates economic growth, it negatively impacts environmental quality. Similarly, economic growth fosters innovation but can degrade environmental conditions if unchecked. Originality/value This research provides a nuanced understanding of how environmental quality can contribute to or undermine economic growth under varying conditions. By integrating a threshold model, the study offers fresh insights into the dynamic interplay of economic growth, environmental sustainability and technological innovation in developed economies. The findings emphasize the importance of policy frameworks that prioritize technological innovation to balance economic and environmental goals, ultimately promoting sustainable development and improved living standards.