Sustainable Financing and Eco-Innovation as Drivers of Low-Carbon Transition: Empirical Evidence from Tunisia

Many emerging economies seek to lower carbon intensity while remaining heavily dependent on fossil fuels. This paper examines how sustainable finance, eco-innovation, and the energy mix shape Tunisia’s low-carbon transition. We use quarterly data for 2000–2023 and an econometric environmental-impact model that links carbon intensity to green finance, innovation, renewable and fossil energy, openness, income, and demographic factors. The results show that sustainable finance consistently reduces carbon intensity across all emission states, with stronger effects when emissions are high. The energy mix is crucial: a larger share of renewable energy lowers carbon intensity, while higher fossil energy use increases it and reinforces fossil carbon lock-in. Eco-innovation has its strongest mitigation effects in high-intensity situations, suggesting delayed effects linked to limited absorptive capacity and technology diffusion. Openness and demographic pressure tend to raise emissions through scale and consumption channels. Overall, the findings depict a finance-anchored but energy-constrained transition. They indicate that Tunisia and similar MENA economies can accelerate decarbonization by scaling credible sustainable finance instruments, speeding up renewable deployment, and strengthening the innovation and governance framework that supports green investment, innovation policy, and energy sector reform in semi-industrialized economies.