The Effect of Real GDP Per Capita, Eco-Innovation, Solar Energy, and Foreign Direct Investment on CO₂ Emissions in G-20 Countries

Amadeus Okky Suryono; Magdalena Triasih Dumauli

doi:10.70716/ecoma.v4i3.528

Authors

Amadeus Okky Suryono Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Indonesia
Magdalena Triasih Dumauli Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Indonesia

DOI:

https://doi.org/10.70716/ecoma.v4i3.528

Keywords:

Environmental Kuznets Curve, Eco-innovation, Solar Energy, Foreign Direct Investment, Renewable Energy

Abstract

This study investigates the interplay between real GDP per capita, solar energy, foreign direct investment (FDI), and eco-innovation on carbon emissions (CO₂) within G20 nations. It aims to understand how economic development and financial liberalization influence environmental outcomes. The research employs a quantitative approach using panel data for 19 G20 countries from 2000 to 2022. The analysis uses panel data regression (Fixed and Random Effects), Autoregressive Distributed Lag–Pooled Mean Group (ARDL-PMG) and ARDL-Mean Group (ARDL-MG) models, and multivariate polynomial regression to capture non-linear relationships, particularly the Environmental Kuznets Curve (EKC). Real GDP per capita has a significant positive impact on CO₂ emissions, indicating economic growth remains an emissions driver. However, country-group analysis reveals patterns: developed G20 nations exhibit a long-run negative relationship between GDP per capita and emissions, validating the EKC hypothesis. In contrast, developing nations show a consistently positive relationship. Renewable energy consumption consistently reduces emissions across all groups. Eco-innovation and FDI show complex, non-linear effects, often increasing emissions in the short run but demonstrating potential for long-term reductions. This research integrates economic variables and renewable energy usage with environmental outcomes within a unified framework for the heterogeneous G20 bloc. It compares developed and developing economies, moving beyond aggregate results to offer nuanced insights. The study underscores the need to couple economic growth strategies with robust environmental regulations. It highlights renewable energy as an immediate tool for emission reduction. It suggests that the environmental benefits of eco-innovation and FDI depend on supportive policies and long-term investment in green technologies.

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