Assessing the role of green innovations and financial development in achieving sustainable performance in China

Over the past few decades, the incidence of technological advancements has helped the world’s economies to grow faster, but at the cost of environmental sustainability. The existing literature, which mainly highlights the role of technology in carbon emissions’ generation through production and financial sectors’ development, neglects the technological impacts on the preservation of load capacity of the Earth. The present study intends to fill this gap by highlighting the role of green technology in enhancing environmental quality. Considering China in this regard over the period from 1990 to 2020, the STIRPAT model better suits the study model. The environmental quality has been estimated using the notion of load capacity factor (LCF), whereas green innovations (GI) have been measured using the utilization of green technologies. Economic growth (EG), financial development (FD), and the impact of renewable energy consumption (REC) on environmental quality have also been estimated. The inferences drawn, using the autoregressive distributed lag (ARDL) technique, show a significant contribution of green innovations, along with the consumption of renewable energy sources, in enhancing the environmental quality of China. Moreover, interesting facts relating to the impact of EG and FD reveal that economic growth and financial development adversely impact the environmental quality in the short run, but this magnitude becomes weak in the long run. Based on the empirical outcomes, this study provides comprehensive policy framework for achieving sustainable development goals, such as SDG 09 (manufacturing innovations), SDG 7 (clean energy technology), SDG 12 (sustainable growth), and SDG 13 (climate action).