Urban sustainability and environmental degradation: the moderating role of green innovation in OECD economies

Accelerating urbanization has intensified environmental pressures on cities globally, positioning urban sustainability as a central concern for scholars and policymakers. This study investigates the direct effects of five urban environmental stressors: fine particulate matter (PM2.5)-based environmental degradation, carbon emission intensity (CEI), urban heat island effect (UHIE), respiratory disease burden (RDB), and green space coverage (GSC) on urban sustainability, alongside the conditional moderating role of green innovation (GI) in each stressor-sustainability pathway. A balanced panel of 25 OECD economies over 2004–2022 is analyzed using the two-step System Generalized Method of Moments (GMM) estimator to address endogeneity, dynamic persistence, and cross-sectional heterogeneity. Urban sustainability is operationalized via the Yale Environmental Performance Index, a composite spanning air quality, ecosystem vitality, climate performance, and public health. Environmental degradation (PM2.5) exerts the largest negative effect on urban sustainability (β = − 2.39), followed by respiratory disease burden (β = − 1.88) and urban temperature differentials (β = − 1.19). Green space coverage yields a significant positive effect (β = 1.67), while carbon emission intensity produces a statistically insignificant direct effect, reflecting limited within-country variation among advanced OECD economies. Green innovation significantly moderates four of five stressor-sustainability pathways, attenuating adverse impacts of environmental degradation, carbon intensity, and respiratory burden; however, it neither offsets thermal stress nor amplifies the ecosystem benefits of green space a pattern interpreted as a technology-stressor mismatch in urban heat management. This study extends the Porter Hypothesis to composite, multi-domain sustainability outcomes and delivers one of the most comprehensive multi-stressor panel analyses for OECD economies to date. Policymakers should align green innovation portfolios with addressable environmental stressors (PM2.5 abatement, respiratory health), invest in urban heat-specific technologies, and treat forest conservation as an independent, complementary sustainability instrument.