Does Technological Innovation Reduce Environmental Degradation? Evidence from China

Abstract

Developed and developing countries are trying to achieve sustainable growth in the present era. Unfortunately, despite being the world’s largest developing country, China is among those countries that have a high ecological footprint as it emits 27% of global carbon emissions in 2021. However, the encouraging fact is that China has become an emerging economy due to technological advancement. Many existing studies have suggested that technological innovation can overcome environmental degradation. Therefore, this study examines whether technological innovation has reduced environmental degradation in China from 1985 to 2018. This study uses the ecological footprint to measure environmental degradation in China. Furthermore, this study also explores the role of economic growth, trade openness, and population on environment. To estimate the models, ARDL cointegration technique is applied, and the findings are further validated using CCR, DOLS, FMOLS, and Granger causality techniques. Overall, empirical results indicate that technological advancement negatively impacts China’s short- and long-term ecological footprint. This is understandable because more innovation leads to better technology that consumes fewer resources and has lower ecological footprints. However, environmental degradation is exacerbated by economic growth and population growth, whereas trade openness helps to mitigate environmental degradation in China. The diagnostic analysis of the study confirms the absence of heteroscedasticity, multicollinearity, and model instability. The study recommends using eco-friendly technologies that can reduce the usage of harmful alternative energy sources. Furthermore, carbon emissions need to be taxed, and environment friendly technologies need to be supported to promote long-term economic growth.

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