Balancing Growth and Sustainability: Can Green Innovation Curb the Ecological Impact of Resource-Rich Economies?

Abstract

The global economy faces a critical challenge: balancing economic survival through natural resource utilization with the imperative of long-term environmental sustainability. Green innovation presents a viable solution, yet its effectiveness hinges on establishing well-structured legislative frameworks. This study, covering the period 1996 to 2022, examines the moderating effect of green innovation on the relationship between natural resource rents and ecological footprint while also considering the roles of globalization, financial development, and energy transition in the ten most resource-abundant countries. Utilizing the augmented mean group (AMG) estimator, the findings indicate that natural resource rents significantly contribute to ecological footprint, reinforcing concerns about resource-driven environmental degradation. However, green innovation mitigates these adverse effects, promoting sustainable resource management in alignment with SDG 12 (Responsible Consumption and Production). Additionally, renewable energy and globalization positively influence environmental conditions, reinforcing the drive toward clean and affordable energy (SDG7), while economic growth, financial development, and non-renewable energy exacerbate environmental harm. Furthermore, foreign direct investment (FDI) increases ecological footprint, reinforcing the Pollution Haven Hypothesis for resource-rich economies. Rigorous robustness checks using CCEMG, FMOLS, and DOLS methodologies, along with country-specific analyses, affirm the empirical validity of these results. In light of these conclusions, the paper advocates for legislative reforms to enhance sustainability and optimize resource utilization, ensuring a balanced approach to economic development and environmental preservation.