Dynamic effect of green financing, economic development, renewable energy and trade facilitation on environmental sustainability in developing and developed countries

This current study focuses on the dynamic effects of green finance, renewable energy consumption, economic development and trade facilitation on environmental sustainability, whereby technological innovation acts as a mediating variable. Based on Sustainable Development Theory, Technology, Innovation Theory, and the Environmental Kuznets Curve (EKC), the research applies a comparative empirical framework to panel data from 2000 to 2023 for 20 developed and 20 developing countries. The analysis uses Dynamic Fixed Effects (DFE) regression, Generalised Estimating Equations (GEE), co-integration testing and robustness tests such as the Sargan and cross-sectional dependence diagnostics. Findings indicate that green finance increases environmental sustainability within developed countries with strong institutional capacity and regulatory coherence. On the contrary, it negatively impacts developing countries due to misallocation and inefficiencies in implementation. Renewable energy consumption positively contributes to sustainability in developing nations, while it shows a negative correlation in developed nations, possibly because of the integration challenges. Economic development leads to environmental degradation in developing countries, while its negative impact is tempered in developed economies as per the EKC. Trade facilitation, however, has a limited or negative impact on sustainability in both contexts, especially in developing nations where industrialisation induced by trade does not protect the environment. Technological innovation moderates the influences of the financial, energy and trade variables on the issue of environmental sustainability in developed countries, boosting the relationships’ effectiveness. However, its mediating role has not sufficiently developed in developing countries due to structural and institutional constraints. This study is therefore a significant contribution to the literature on sustainability in the developing world since it provides a dual economy analysis that harmonises financial, technological and trade elements of sustainability. The results support specified policy interventions: less developed countries need to enhance institutional quality and capacity of innovations, whereas developed countries should concentrate on integrating renewables and scaling up green technologies to sustain environmental benefits.