Nonlinear effect of environmental technologies on oil consumption in OECD countries

Purpose This paper examines the nonlinear implications of environmental technologies on oil consumption in 29 OECD countries, which has not been extensively investigated. Design/methodology/approach To achieve the research objective, the annual panel data from 1999 to 2021 is collected and analysed using the dynamic panel threshold method. Findings The dynamic panel threshold model shows that eco-innovation has positively affected oil consumption before its threshold. However, the impact reverses when eco-innovation moves beyond its threshold level, indicating an inverted-U-shaped relationship. Moreover, the effects of independent variables were found to vary before and after the threshold value. The robustness estimations are largely aligned with the baseline estimation. Research limitations/implications The findings suggest that the government should introduce steps to counter the negative influence of eco-innovation at the initial stage and allocate more resources to promote eco-innovation. Originality/value Instead of assuming the threshold variable is exogenous, this paper adopts dynamic panel threshold estimation that assumes the threshold variable to be endogenously decided.