Managing carbon emissions: green finance and technological innovation

Purpose Climate change is a burning issue, and there are many climate-laggard economies that are failing to meet their Conference of the Parties 28 commitments. Existing research emphasizes the importance of green finance (GF) and technological innovation (TI) in the reduction of carbon (CO2) emissions. However, little attention has been paid to their effectiveness across different quantiles or whether it is affected by economic policy uncertainty (EPU). This study fills these gaps. Design/methodology/approach We performed a quantile-based analysis and proposed the EPU as an important moderating factor. For this purpose, the data of nine climate-laggard countries were gathered over the period from 1998 to 2022. The method of moments quantile regression (MMQR) is applied to analyze the empirical results. The robustness of the results is tested through MMQR after including renewable energy consumption (REC). Findings The results indicate that GF reduces CO2 emissions significantly in all quantiles; this gives evidence that the effect of GF is consistent. TI is not significant in the lower and middle quantiles but is significant and negative at the highest quantile, suggesting that its impact is greatest when emissions are greatest. EPU is negative and significant for all the quantiles alone but weakens the effects of both GF and TI when included as a moderator. Originality/value The research provides novel theoretical and empirical insights, underlining the fact that institutional settings should be stabilized to ensure that the positive environmental impacts of finance and innovation are maximized in climate-laggard economies.