DOI: https://doi.org/10.36347/sjebm.2026.v13i06.006

Pages: 292-302

Environmental innovation has emerged as a critical policy instrument for achieving sustainable development and mitigating climate change. However, existing studies provide mixed evidence regarding its effectiveness in reducing carbon emissions and often overlook differences between developed and developing economies. This study examines the impact of environmental innovation on per capita CO₂ emissions across 61 countries from 2000 to 2021. Environmental innovation is measured using the stock of environment-related patents, while carbon emissions are measured as per capita CO₂ emissions. To address unobserved heterogeneity, cross-sectional dependence, and potential endogeneity, the analysis employs fixed-effects, Driscoll-Kraay, and fixed-effects instrumental variable (FE-IV) estimators. The results indicate that environmental innovation significantly reduces CO₂ emissions in the full sample. However, substantial heterogeneity exists across country groups. Environmental innovation exerts a strong and statistically significant emissions-reducing effect in developed economies, whereas its impact is insignificant in developing economies. The findings also provide evidence supporting the Environmental Kuznets Curve hypothesis, suggesting a nonlinear relationship between economic growth and environmental degradation. Furthermore, the instrumental-variable results confirm the robustness of the main findings after accounting for endogeneity. The study contributes to the environmental innovation literature by highlighting the importance of technological and institutional conditions in shaping environmental outcomes. The findings suggest that while environmental innovation is an effective climate mitigation tool in developed economies, developing countries require complementary investments in institutional capacity, technological infrastructure, and policy support to fully realise its environmental benefits. These results offer important implications for climate policy, inno