Green growth and sustainable energy transitions: evaluating the critical role of technology, resource efficiency, and innovation in Europe’s low-carbon future

Renewable energy, technology, and innovation are central to sustainable development, but their effects vary by country because of institutional and economic differences. Previous studies often ignore these differences. By incorporating institutional and economic differences, our study aligns with a growing body of research emphasizing the importance of context in evaluating sustainable development strategies. This nuanced approach allows us to contribute to the ongoing debate by offering a more comprehensive framework for understanding how renewable energy, technology, and innovation interact with the broader economic and institutional environment to drive sustainable outcomes. This study provides a comprehensive analysis to investigate the determinants of green growth in European economies with changing income (higher, upper middle, and lower income) levels. For this study, we have taken data from 1990 to 2023 and employed the Cross Sectional Autoregressive Distributed Lag model. The empirics show that renewable energy consumption and economic growth significantly enhance the green growth across all income groups. One percent increase in renewable energy consumption leads to increase the green growth by 0.1488, 0.0965, and 0.1613 percent respectively while one percent increase in GDP leads to increase green growth by 0.24, 0.26, and 0.32 percent for higher, upper-middle and lower middle-income countries respectively in long run. Nevertheless, technological innovation and globalization show mixed results, being more effective in higher income economies due to stronger institutions and green innovations. More precisely, one percent increase in technological innovation leads to rise green growth by 0.0762 percent in higher income economies while it shows insignificant result for upper and lower middle-income economies. On the other hand, one percent increase in globalization leads to decrease green growth by −0.1439 percent in upper middle income only while it shows insignificant result for high and lower middle-income economies. Furthermore, Natural resource rents generally enhance green growth particularly in lower income economies, supporting resource curse hypothesis. One percent increase in natural resource rents leads to rise green growth by 0.0159 percent in lower middle income. The findings emphasis the need for income specific state policy that promote sustainable development. The policymakers should focus on clean energy investment, green innovation and strengthen institutional frameworks to ensure sustainable green growth.