How does economic globalization affect carbon dioxide emissions? Evidence on the moderating role of technological innovation

The study examines the impact of economic globalization on carbon dioxide (CO₂) emissions in middle- and low-income countries in Asia over the period 2000–2023. Furthermore, this study investigates the moderating role of technological innovation in this relationship, which is one of its key contributions. As for the estimation, the research models are estimated using the Generalized Method of Moments (GMM) method, whereas the Fully Modified Ordinary Least Squares (FMOLS) and the Dynamic Ordinary Least Squares (DOLS) are also employed to provide robustness evidence in the long run. The GMM results indicate that economic globalization has a positive impact on CO₂ emissions in middle- and low-income Asian countries. The robustness results obtained from the FMOLS and DOLS estimators, however, offer more long-run evidence suggesting the environmental effects of economic globalization become less detrimental to the environment when accompanied by cleaner technologies, higher production efficiency, and a transition toward sustainable energy systems. Besides, the results show that technological innovation acts as an important moderator in the relationship between globalization and CO₂ emissions, as it reduces the negative environmental impacts of globalization. This is a novel contribution of the study. Most importantly, the estimated coefficients of the control variables remain largely consistent across the GMM, FMOLS, and DOLS estimations, thereby providing additional support for the robustness and reliability of the empirical findings. Moreover, the results remain robust when alternative measures of economic globalization are employed, including the composite globalization index as well as the trade globalization and financial globalization indicators. Overall, the findings highlight that sustainable environmental outcomes in these countries can be achieved by promoting economic globalization, technological innovation, renewable energy transition, and cleaner production systems.