Developing countries are typically unable to generate sufficient amount of revenue from taxation because these countries face a number of institutional problems in the process of revenue generation. One of the main problems is corruption in tax administration. The two important components of revenue generation are tax administration and tax system reforms [Brondolo, et al. (2008)]. The main objective of these is to increase the efficiency of tax administrations, specifically by reducing corruption and tax evasion. The second main problem of low revenue generation is political instabilities in developing countries. One of the important characteristics of political instability is unstable and governments and, hence, incoherent policy framework, which hinder in the process of long-term reforms in the system. The quality of governance as a whole is also relevant in this context. It is widely agreed that the presence of tax evasion and corruption of public officials is a social phenomenon that can significantly reduce tax revenue and seriously hurt economic growth and development.

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In the past decade, researchers have shifted their interests to explore different ways to mitigate environmental degradation. In that context, the present study explores the role of solar energy and eco‐innovation in reducing environmental degradation in China. The study utilized data for the period 1990–2018 and applied the latest available econometric technique, a quantile autoregressive distributed lag model, to determine the impacts of solar energy and eco‐innovation on improving China's environmental quality. According to the empirical results, in the long term, solar energy is negatively and significantly associated with CO2 emissions at higher quantiles. Eco‐innovation has proven to be the most important channel to mitigate CO2 emissions in China. Eco‐innovation is exerting a negative and significant influence on CO2 emissions at all quantiles in the long term. In addition, the population size is causing CO2 emissions to surge significantly at lower quantiles. The empirical analysis reveals that per capita income (PI) is positively associated with CO2 emissions at all quantiles, but it is significant only at higher quantiles in China. We found evidence of unidirectional causality for eco‐innovation to CO2 emissions and solar energy to CO2 emissions. However, for population and CO2 emissions, per capita income, and CO2 emissions, we found bidirectional causality. As indicated by our empirical results, solar energy and eco‐innovation are the two most effective channels to control CO2 emissions in China. Therefore, policies based on the promotion of eco‐innovation and the initiation of new solar energy projects can control emissions and improve environmental quality in China. Integr Environ Assess Manag 2022;18:555–571. © 2021 SETAC

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