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Sustainable Development Pathways: How Fiscal Policy, Green Innovation, and Environmental Governance Shape Ecological Footprints in G‐20 Economies?

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  • Yang Sun
  • Elizabeth Stephen

Abstract

Sustainable development requires addressing the ecological impacts of economic growth and resource dependence. The ecological footprint (EF) is a key indicator of sustainability, yet its relationship with fiscal policy, natural resource rents, innovation, and governance remains underexplored. This study examines the dynamic effects of fiscal policy (FP), natural resource rents (NRR), environmental governance (EG), and green innovation (GI) on EF in G‐20 economies from 1990 to 2023. Using the Cross‐Sectional Autoregressive Distributed Lag (CS‐ARDL) model, which accounts for cross‐sectional dependence and slope heterogeneity, the analysis reveals that GI and strong EG significantly reduce ecological pressures, while FP measures and NRR tend to exacerbate them. Governance is shown to moderate these relationships, enabling economies with stronger institutions to leverage innovation more effectively for sustainability gains. The significant negative coefficient of the error‐correction term confirms long‐run convergence despite external shocks, with long‐run effects found to be stronger than short‐run dynamics. These findings highlight the importance of aligning fiscal strategies with sustainability goals and strengthening governance to enhance the effectiveness of green innovation. The study contributes to policy debates by identifying key levers for reducing ecological footprints, offering actionable insights for governments, environmental agencies, and international organizations seeking to promote sustainable development transitions.

Suggested Citation

  • Yang Sun & Elizabeth Stephen, 2026. "Sustainable Development Pathways: How Fiscal Policy, Green Innovation, and Environmental Governance Shape Ecological Footprints in G‐20 Economies?," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(S2), pages 170-181, March.
    • Handle: RePEc:wly:sustdv:v:34:y:2026:i:s2:p:170-181
    DOI: 10.1002/sd.70310
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