The Green Paradox in Emerging Asian Economies: Do Green Building and Energy Efficiency Fuel the Rebound Effect or Drive Eco-Innovation?

This study investigates the interplay of green building and energy efficiency with innovative behavior and energy conservation measures within the economies of emerging Asia. It considers 14 countries for the period 2000–2023, built around the induced innovation hypothesis and Green Paradox. The empirical analysis deploys a layered econometric strategy comprising two-way fixed effects (FE-DK), MG-ARDL long-run estimation, Panel Smooth Transition Regression (PSTR), panel quantile regression, and Dumitrescu–Hurlin Granger causality tests. The findings are threefold. First, green building investment exerts a modest positive effect on eco-innovation but has no discernible effect on energy rebound at the aggregate level. Energy efficiency, however, is the primary rebound driver, with a near unit-elastic effect indicating that efficiency gains are almost entirely offset by compensating increases in aggregate energy demand. Second, non-linear analysis reveals a pronounced threshold effect: green building investment enhances eco-innovation at low levels but suppresses it beyond a critical threshold, a pattern corroborated by quantile regression across the performance distribution. Third, governance quality is the dominant institutional moderator of both outcomes, exerting particularly powerful leverage at high investment intensities. The Green Paradox is thus neither universal nor constant: its manifestation is contingent on investment scale and institutional quality.