Exploring the roles of natural resources on sustainability blueprint in G7 countries amidst green energy, technological innovation, and carbon‐tax intervention

Abstract

Today's global economy faces the most devastating challenges of global warming occasioned by overdependence on natural resources. Besides, the dilemma of choosing between economic benefits and environmental costs emanating from natural resources heightens the empirical relevance of green energy in recent times. To solve this developmental puzzle, the current study presents extends the knowledge frontier by evaluating the impacts of natural resource dependence, green energy (captured by biofuels and renewable energy), carbon tax, and technological innovation on environmental sustainability in G7 economies. The empirical model endogenizes environmental policy stringency and financial development from 1996 to 2019. The empirical verification anchors on second‐generation estimators entailing Cross‐Sectional Autoregressive Distributed Lag (CS‐ARDL), Common Correlated Effects Mean Group (CCEMG), augmented mean group (AMG), and novel Method of Moment Quantile Regression (MMQR). The fallouts from the analyses uncover that natural resource dependence militates against the attainment of the sustainability blueprint by escalating the surge in CO2 emissions in G7 countries. Similarly, the feedbacks from financial development support the surge in emissions. On the flip side, green energy, technological innovation, carbon tax, and environmental policy appear as effective tools for mitigating the surge. The Fully Modified Ordinary Least Square (FMOLS) estimator for the country‐specific analysis corroborates the panel findings. Additionally, two channels of causalities, including unidirectional and bidirectional nexuses, are apparent from the estimated model. Policy measures are suggested based on empirical findings.