Asymmetric Nexus between Green Technology Innovations, Economic Policy Uncertainty, and Environmental Sustainability: Evidence from Italy

Over the last few decades, climate change and global warming have intensified a serious threat that may deteriorate global sustainable development. The factors significantly contributing to global warming are greenhouse gases, mainly carbon dioxide emissions. Therefore, it is crucial to consider the variables affecting carbon emissions considerably. This study examines symmetric (linear) and asymmetric (non-linear) effects of green technology innovation (GTI), economic policy uncertainty (EPU) along with foreign direct investment (FDI), and economic development (GDP) on carbon emissions (CO2) by utilizing yearly time series data between 1970-2018 in Italy. We employed linear and non-linear autoregressive distributed lag (ARDL) approaches to examine short- and long-run estimates. The symmetric results show that GTI and EPU mitigate environmental degradation in the long run and intensify in the short run, whereas FDI increases environmental issues over the long and short run. Nevertheless, the asymmetric outcomes demonstrate that positive shocks in GTI lessen CO2 emissions, whereas negative shocks in GTI significantly escalate CO2 emissions. Furthermore, EPU and FDI positive and negative shocks significantly enhance environmental degradation. Based on these findings, important policy implications for policymakers to make strong policies to achieve carbon neutrality targets and achieve sustainable economic growth are proposed. Finally, because positive and negative changes in GTI, EPU, and FDI have different consequences on CO2 emissions, policymakers should consider asymmetry across these variables when assessing their impact.