The dynamic effect of eco-innovation and environmental taxes on carbon neutrality target in emerging seven (E7) economies

After the Paris Climate Conference (Conference of the Paris COP21), emerging countries also start succeeding in carbon neutrality targets. In doing so, environmental sustainability has become a vital concern over the past few decades. To control the pollution from combustion gases and to mitigate the destructive effects of carbon emission on environmental quality, governments and policymakers need to consider the important factors that decrease the net carbon emission level, such as eco-innovation and environmental taxes. The literature on the environmental taxes and eco-innovation to control carbon emission is scant. Therefore, this study fills the knowledge gap by evaluating the dynamic effect of eco-innovation and environmental taxes on the carbon neutrality target in emerging seven (E7) economies from 1995 to 2018 and other control variables. The study uses advanced panel data econometric tools to handle various issues such as cross-section dependence structural break and slope heterogeneity for empirical analysis. The study uses the second-generation panel unit root test, Westerlund's cointegration tests, CS-ARDL long-run and CS-ARDL short-run analysis, AMG, and CCEMG for robustness check. The study's outcomes confirm that eco-innovation and environmental taxes play a major role in carbon abatement and Environmental Kuznet Curve (EKC) presence found in E7 countries.