Technological innovation as a moderator in the nexus between economic growth and environmental quality: evidence from Kuwait

Abstract This study investigates the moderating role of technological innovation in the relationship between economic growth and environmental quality in Kuwait, an economy heavily reliant on hydrocarbons. Grounded in the Environmental Kuznets Curve (EKC) and Endogenous Growth frameworks, the research explores whether innovation can offset the environmental costs of economic expansion. Using annual data from 1997 to 2022, the study employs Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegration Regression (CCR) methods to examine the long-run interactions among carbon emissions, gross domestic product, financial development, trade openness, and technological innovation. The empirical results reveal that economic growth significantly increases CO 2 emissions, confirming the early-stage EKC pattern for Kuwait. However, the interaction term between GDP and technological innovation demonstrates a negative and statistically significant effect, indicating that innovation moderates the growth–emissions relationship by reducing environmental pressure. Financial development is found to contribute modestly to emissions, while trade openness exerts an insignificant effect in the long run. Overall, the findings suggest that innovation in Kuwait remains primarily industrial and not yet environmentally transformative. Strengthening research and development capacity, fostering eco-innovation, and aligning financial and trade policies with sustainability objectives are essential to achieving a low-carbon transition. The study offers important policy directions for integrating innovation-driven strategies into Kuwait’s national development and environmental sustainability agenda.