Bridging fossil legacy and green futures: How technological innovation shapes the environmental sustainability trajectory of global oil giants

Abstract Oil‐dependent economies are encountering substantial environmental challenges stemming from the extraction, processing, and combustion of oil. These economies have challenges in diversifying their energy portfolio owing to their reliance on oil revenue. This study examines data from the five foremost oil‐producing countries from 1990 to 2020 to assess the influence of green energy, technological innovation, oil production, and primary energy consumption on environmental quality. The Panel ARDL method is used to evaluate the impacts in both the long‐run and short‐run. Furthermore, robustness checks are performed using the panel quantile and panel least squares methodologies. The findings demonstrate that the transition to green energy significantly decreases emissions in the short‐run; however, this impact becomes negligible in the long term owing to systematic inertia in oil‐dependent economies. Technological innovation also contributes to substantial decarbonization. The utilization of primary energy sources continually elevates carbon emissions in both the long and short term. These findings suggest that oil‐producing economies need to invest in green energy for immediate benefits. Additionally, policymakers should prioritize technological innovation to mitigate the effects of fossil fuel reliance. Overall, this study provides empirical evidence to help rebalance the energy portfolio in oil‐reliant economies, aligning their growth targets with environmental goals.