Exploring The Impact of Carbon Credits Control on Environmental Performance with Moderating Role of Green Innovation

Abstract

Environmental sustainability is now a big problem around the world because rising carbon emissions are threatening the balance of ecosystems and long-term growth. So, it's very important to know and consider the policy, economic, and financial factors that affect how well our environment works. The primary goal of this study is to examine the impact of regulating carbon credits on the environment, with green innovation playing a moderate role. This research also examined important macroeconomic variables such as GDP growth, foreign direct investment, and interest rates. Carbon intensity is also a way to measure how well something is working for the environment, carbon emissions are a way to control carbon credits by reducing CO2 emissions, and patents can be used to measure green innovation. Data used for the study is balanced data from specific SAARC nations, encompassing the years 2013 to 2023. A quantitative research methodology is used, implementing panel data regression techniques. A fixed effects regression model with Driscoll–Kraay standard errors is used along with a Prais–Winsten regression model with panel-corrected standard errors as a robustness check. This is based on diagnostic tests and the model's suitability. The study empirical results tells that carbon emissions have a considerable adverse effect on environmental performance, indicating that increased carbon usage will devalue the environmental quality. Green innovation has a positive impact on how well the environment works, and it also creates a relationship between carbon emissions and environmental performance much weaker by decreasing the bad effects of emissions on the environment. GDP growth has a positive effect on the environment, while foreign direct investment has not a positive impact. This suggests that the countries in the sample have pollution-intensive investments. The effect of interest rates is not very strong and varies from one requirement to the next. This research will serve and add value to the existing research by bringing together carbon credit control, green innovation, and macroeconomic factors into a single framework for SAARC countries. The results have important policy recommendations. This study mainly emphasized the need to improve green innovation and make sure that carbon credit systems are according to the strategies for sustainable developments in economies to enhance environmental performance.