Economic Complexity, Green Innovation, and Environmental Performance: Evidence on Heterogeneity and Structural Relationships in G20 Economies

Environmental sustainability remains a key policy and governance challenge for G20 economies, which contribute significantly to global production, energy consumption, and environmental pressures. This study examines how structural economic transformation, green technological innovation, energy use, and urbanization influence environmental performance across G20 countries over the period 2000–2024. Environmental performance is measured using the environmental performance index (EPI). To address cross-sectional dependence, slope heterogeneity, and mixed integration orders, the analysis employs advanced panel estimators, including CS-ARDL, augmented mean group (AMG), and common correlated effects mean group (CCEMG). The results indicate that economic complexity and green technology innovation significantly improve environmental performance, highlighting the importance of diversified production structures and innovation-oriented policies. Renewable energy consumption consistently enhances environmental outcomes, underscoring the role of clean energy policies in sustainability governance. In contrast, economic growth exerts a negative long-run effect, confirming the persistence of growth–environment trade-offs in the absence of effective regulation. Political stability shows a modest but positive impact, suggesting that stable governance environments support the implementation and continuity of environmental policies, though stability alone is insufficient without targeted interventions. Urbanization produces mixed effects, reflecting differences in urban planning capacity and policy coordination across countries. Overall, the findings emphasize the need for integrated governance strategies that combine political stability, green innovation, renewable energy expansion, and sustainable urban development to improve environmental performance in G20 economies.