Amplifying circular technological innovation for low greenhouse emissions: Empirical evidence from 30 advanced and emerging economies

Abstract

This paper aims to examine the causal effect of circular technological innovation on greenhouse gas emissions. In the study, panel data are collected from 30 advanced and emerging economies spanning more than two decades, and a recently innovated instrumental variable approach with a common factor error structure is used to analyze dynamic panel data. The results provide robust findings during sensitivity tests. We find that technological innovation in a circular economy causes a significant reduction in major greenhouse gas emissions, including carbon dioxide (CO₂), methane (CH₄) and nitrous oxide (N₂O). Since the net effects of circular technological innovation translate into a reduction of emissions, this appears as a suitable tool in the fight against climate change. In addition, our study highlights the need to reinforce measures to promote circular technological innovation to influence environmental quality, compared to viewing it as an alternative approach to environmental sustainability.