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Technological progress and carbon emissions: Evidence from the European Union

Author

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  • Nam, Hyun-Jung
  • Ryu, Doojin
  • Szilagyi, Peter G.

Abstract

We examine the U-shaped effect of technological progress on CO₂ emissions using digital and high-tech trade as well as R&D levels as threshold variables. By analyzing a comprehensive European Union dataset, we reveal the U-shaped effects of digital and high-tech trade and R&D investment on CO₂ emissions, suggesting that technological progress modifies the conventional Environmental Kuznets Curve. At low levels of technological progress, it reduces CO₂ emissions; however, CO₂ emissions increase again beyond a certain threshold. Institutional quality moderates this relationship, highlighting its role in shaping the environmental impact of technological progress, and mitigates the negative impact of technological progress on emissions in its advanced stages. As investors become more aware of environmental liabilities and regulations, incorporating environmental factors into financial policies and risk management becomes crucial. Our findings underscore the role of institutional quality in mitigating the adverse effects of technological progress on CO₂ emissions.

Suggested Citation

  • Nam, Hyun-Jung & Ryu, Doojin & Szilagyi, Peter G., 2025. "Technological progress and carbon emissions: Evidence from the European Union," Global Finance Journal, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000833
    DOI: 10.1016/j.gfj.2025.101156
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    JEL classification:

    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment

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