Environmental Quality in Emerging Economies: The Role of Green Innovation and Climate Policy

ABSTRACT Faced with accelerating environmental degradation, emerging economies must leverage green innovation to decouple growth from emissions. However, the effectiveness of such innovation remains highly uncertain without supportive policy frameworks. This study investigates the direct impact of green innovation on environmental quality, measured by CO 2 emissions and carbon intensity, in emerging economies, and critically examines how sectoral, cross‐sectoral, and international climate policies moderate this relationship. Using a panel dataset of 16 emerging economies over the period 2000–2022, the study employs the Pooled Mean Group Autoregressive Distributed Lag (PMG‐ARDL) estimator, which allows the identification of both short‐run and long‐run relationships while accounting for cross‐country heterogeneity. The results reveal that green innovation alone has limited short‐term effects on environmental quality but generates significant long‐term reductions in CO 2 emissions. More importantly, climate policies play a crucial moderating role: sectoral, cross‐sectoral, and international policies significantly strengthen the environmental benefits of green innovation, with sectoral policies showing the strongest amplification effect, followed by cross‐sectoral and international policies. These findings indicate that green innovation becomes truly effective in improving environmental quality only when embedded within coherent, stringent, and well‐coordinated climate policy frameworks. The study has important policy implications. It highlights that innovation‐driven environmental improvements cannot be achieved in isolation and require strong institutional support through integrated climate policies. Policymakers in emerging economies should therefore prioritize the alignment of green technological progress with stable and ambitious sectoral regulations, coordinated cross‐sectoral strategies, and active engagement in international climate commitments to accelerate the transition toward sustainable and low‐carbon development.