COP21 Roadmap: Do innovation, financial development, and transportation infrastructure matter for environmental sustainability in China?

The purpose of the present study is to explain the long-run and causal effects of innovation, financial development, and transportation infrastructure on CO2 emissions using the combined cointegration and wavelet coherence approaches over the period from 1971 to 2018, while using economic growth as a control variable in the model. The outcomes of the Bayer-Hanck cointegration test show that there is an important cointegration equation among CO2 emissions, innovation, financial development, transportation infrastructure, and real GDP. Moreover, the findings from a wavelet power spectrum reveal that there is a significant vulnerability in innovation, financial development, transportation infrastructure, and CO2 emissions at different time frames and frequencies. Furthermore, the outcomes of wavelet coherence approach reveal that (i) Innovation is observed as a significant predictor of CO2 emissions over the period from 2007 to 2013; (ii) In the long run, there are negative correlations between CO2 emissions and financial development; (iii) Over the periods from 2000 to 2015, and from 1985 to 1989, transportation significantly causes CO2 emissions. Our findings have substantial policy implications that suggest there is a need to strengthen innovation and transportation infrastructure to achieve environmental sustainability targets.