Innovation renewable energy and environmental sustainability in Norway evidence from ARDL bounds testing

Understanding whether innovation-led and renewable-based growth can deliver genuine environmental sustainability remains a central challenge for developed, resource-dependent economies. Norway presents a particularly compelling case, as it combines one of the world’s cleanest electricity systems and a strong innovation capacity with a continued reliance on petroleum production and energy-intensive trade. This structural duality raises important questions about whether technological progress and the deployment of renewable energy are sufficient to offset the environmental pressures associated with economic growth and global integration. Drawing on insights from environmental economics and innovation-led growth theory, this study examines the long-run and short-run relationships between innovation (INNO), renewable energy (RE), economic growth (EG), trade openness (TRD), foreign direct investment (FDI), and environmental degradation in Norway over the period 1990–2023. Employing the autoregressive distributed lag (ARDL) bounds-testing approach, the analysis accounts for mixed orders of integration and incorporates structural transformations through endogenous break considerations. To move beyond the limitations of carbon-only assessments, the study complements CO₂ emissions with broader sustainability indicators, including the ecological footprint and the load capacity factor. The results reveal a stable long-run equilibrium relationship among the variables. INNO and RE consistently reduce environmental pressure across all indicators, supporting the view that directionally targeted technological change plays a crucial role in decarbonization and ecological sustainability. In contrast, EG, TRD, and FDI exert positive pressures on environmental degradation, reflecting scale and composition effects linked to Norway’s resource-based economic structure. Robustness checks using alternative cointegration estimators and Fourier-based methods confirm the stability of the findings. Compared with existing empirical literature on developed and resource-rich economies, the results highlight that renewable electricity dominance alone does not guarantee full environmental decoupling; rather, sustained reductions in ecological pressure require INNO policies and investment strategies explicitly aligned with low-carbon and resource-efficient transitions. The study contributes to the literature by providing country-specific evidence that integrates emissions-based and ecological indicators, offering nuanced insights into the conditions under which INNO and RE can support long-run environmental sustainability in advanced, open economies.