Leveraging AI innovation for a sustainable environment in G-7: Finance and governance roles

Rising ecological footprints in G-7 countries pose significant challenges to global sustainability, despite their economic and technological leadership. While prior research has examined individual drivers of environmental degradation in advanced economies, there remains a critical gap in understanding the integrated roles of artificial intelligence (AI), financial accessibility, and government effectiveness in mitigating ecological pressures, particularly through comprehensive panel data analysis in the G-7 context. This study addresses this gap by exploring how these factors influence environmental sustainability across G-7 nations, using the ecological footprint as a key indicator from 2010Q1 to 2022Q4. Employing the Panel Mean Group Autoregressive Distributed Lag model as the primary estimator, with Augmented Mean Group and Common Correlated Effects Mean Group estimators for robustness, the empirical results reveal that economic growth and urbanization significantly exacerbate ecological degradation in both the long and short run. Conversely, AI innovation, financial accessibility, and effective governance substantially reduce environmental impacts. These findings advance the discourse on Sustainable Development Goals (SDGs), especially SDG 9 (Industry, Innovation and Infrastructure), SDG 11 (Sustainable Cities and Communities), and SDG 13 (Climate Action). To foster a sustainable transition, policymakers should prioritize investments in AI-driven green technologies to optimize resource efficiency, expand inclusive financial mechanisms to fund eco-innovations and renewable projects, and implement governance reforms that enforce stringent environmental regulations in G-7 economies. • This study investigates the impact of AI innovation, government effectiveness, and financial access on the ecological footprint in G-7 countries. • The PMG-ARDL method was employed to check the short- and long-term impacts of various factors on the ecological footprint. • GDP expansion and urbanization substantially elevate the ecological footprint. • Government efficacy, financial accessibility, and AI innovation markedly mitigate environmental degradation.