Striving for carbon neutrality in EU region: examining the role of environmental policy stringency in geopolitical risk and energy transition

Abstract

Global economic policymakers are facing increasing demands from diverse environmental constituents to prioritize sustainable development through the implementation of strict environmental policies, energy transition strategies, and the reduction of fossil fuel consumption by fostering technological advancement. This study aims to assess the moderating role of environmental Policy Stringency (EPS), among Geopolitical Risks (GPR), Energy Transition (ET), Technological Innovation (INV), and environmental degradation (CO2 emission). This study relies on empirical datasets spanning the years 1990 to 2022 in 13 EU countries and employed an extensive range of econometric techniques., Dynamic Ordinary Least Square (DOLS), Fully modified Ordinary Least Square (FMOLS), Canonical Cointegration Regression (CCR), and Method of Moment Quantile Regression (MMQR) to examine the data. The empirical findings demonstrate that interaction of GPR*EPS, INV*EPS, and ET*EPS plays a crucial role in promoting environmental sustainability and lowering CO2 emissions. Whereas, environmental degradation is attributed to higher geopolitical instability and increased economic activities. Further, Quantile Regression (QR) and Feasible Generalized least square (FGLS) methods are employed to check the robustness empirical findings of the primary techniques. Based on our comprehensive empirical research findings, we can put forth constructive policy recommendations aimed at addressing environmental concerns and achievement of SDGs 7 & 13 in EU region