The role of green industrial transformation in mitigating carbon emissions: Exploring the channels of technological innovation and environmental regulation

Publication Name

Energy and Built Environment


The industrial sector is vital to economic progress, yet industrial pollution poses environmental and economic concerns. The purpose of the study was to investigate the influence of green industrial transformation in reducing Pakistan's carbon intensity between 1975 and 2020. Carbon emissions are considered an endogenous construct, while foreign direct investment (FDI) inflows, technological innovation, green industrial transformation, environmental legislation, and research and development (R&D) investment are possible mediators. The association between variables is assessed using the robust least-squares approach. Green industrial transformation is connected with lower carbon emissions, yet technical innovation, R&D investment, and inbound FDI raise a country's carbon emissions. The findings support the pollution haven hypothesis in a country. The causality estimates indicate that inward FDI contributes to environmental regulations; green industrial transformation directly relates to inbound FDI and R&D expenditures; and technological innovations correspond to inbound FDI, R&D expenditures, industrial ecofriendly progression, and environmental standards. According to the impulse response function, environmental policies are anticipated to have a differential effect on carbon emissions in 2023, 2024, 2028–2030, while they are likely to decrease in the years 2025–2027 and 2031 forward. Additionally, inward FDI and technology advancements would almost certainly result in a rise in carbon emissions over time. Green industrial transitions are projected to result in a ten-year reduction in carbon emissions. The variance decomposition analysis indicates that eco-friendly industrial adaptations would likely have the largest variance error shock on carbon emissions (11.747%), followed by inbound FDI, technological advancements, and regulatory changes, with R&D spending having a minimal impact over time. Pakistan's economy should foster a green industrial revolution to avoid pollution and increase environmental sustainability to meet its environmental goals.

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