Breaking down the complexity of sustainable development: A focus on resources, economic complexity, and innovation

The escalating global concern regarding climate change has necessitated the adoption of green innovation and pollution mitigation as crucial steps toward realizing sustainable economic development. This research fills a gap in the literature by studying the impacts of economic complexity, green innovation, and natural resource rent on trade-adjusted carbon emissions in G-7 economies. Our empirical findings suggest that there has been a substantial decline in the carbon emissions of the G-7 nations, largely attributable to the increasing complexity of their economies. The results also reveal a significant inverse relationship between CO2 emissions and green innovation. Interestingly, the impact of natural resource rent on CO2 emissions is positive at the 25th quantile but significantly negative at the 75th and 90th quantiles. In addition, economic growth was found to exert a positive influence on carbon emissions, whereas environmental taxes and energy productivity were found to have a negative effect on carbon emissions, thereby aiding in the attainment of carbon neutrality. These findings suggest that regulators and policymakers should prioritize economic complexity, natural resources, energy productivity, and green innovation to meet G-7's environmental sustainability goals.