Realizing direct and indirect impact of environmental regulations on pollution: A path analysis approach to explore the mediating role of green innovation in G7 economies.

The alarming impact of climate change and environmental pollutants has increased the focus of policymakers and think tanks' focus on formulating environmental regulations. Environmental regulations may reduce emissions directly and indirectly, as postulated by the famous Porter Hypothesis. It shows that environmental regulation may enhance pollution-reducing innovation by reducing agency costs while at the same time increasing firms' private benefit. The study is designed to investigate environmental regulations' direct and indirect impact on CO2 and GHG emissions using innovations as mediation factors. The study employs a structural equation method using data on G7 economies from 1990 to 2020 to test the relationship between regulations, innovations, and pollution. The study findings confirm that environmental regulations help reduce emissions directly. Our findings also confirm the Porter hypothesis whereby regulations encourage innovations and result in reduced emissions through this indirect channel. The study findings have significant implications for controlling pollution through placing environmental regulations and encouraging innovations.

Economic policy uncertainty and environmental degradation: the moderating role of political stability.

The sustainability of the natural environment has become a serious policy agenda across the world. In this essence, the literature has discerned many macroeconomic factors that are causing environmental degradation. Among others, the economic policy uncertainty (EPU) is another factor that can uplift CO2 emissions but was ignored in contemporary literature. Given that, the current analysis tends to uncover the role of EPU in CO2 emissions and how political stability moderates this relationship. The empirical analysis was arranged on 20 years of financial data (2000-2019) of BRICS economies, and fully modified least square (FMOLS) and dynamic least square (DOLS) models were utilized to establish the empirical relationship. The empirical results reveal the significant positive impact of EPU while the negative impact of political stability on CO2 emissions. Furthermore, the moderating impact of political stability was observed in the relationship of EPU-CO2 emissions. In long run, the higher economic policy uncertainty intensifies the emissions of CO2 which can be reduced by promoting political stability. The empirical analysis further advocates the dynamic impact of financial development, foreign investment, economic growth, and resource rent on pollution emissions. The moderating role of political stability implies that policy officials should certainly improve the stability of political conditions within a country. Moreover, they should ensure the overall consistency in economic policies. This study allures existing literature by exploring the moderating role of political stability in EPU and CO2 emissions nexus.