Enhancing climate action in OECD countries: the role of environmental policy stringency for energy transitioning to a sustainable environment

Abstract

Climate change affects the world economy, environment, and human well-being, jeopardizing overall sustainability. The escalating impacts of climate change emphasize the necessity to assess the moderating influence of environmental policy stringency (EPS) on the association of energy transition (ET) and GHG emissions from 1990 to 2020 across 36 OECD countries. Further, this study incorporates the direct impact of energy transition (ET), environmental-related technology (ERTs), green innovation (INV), and Gross Domestic Product (GDP) on GHG emission. For this purpose, study employs an extensive range of econometric techniques, including DOLS, FMOLS, CCR, and MMQR approaches to evaluate data attributes. The findings of MMQR demonstrate that interaction of ET*EPS contributes to lower GHG emissions from −0.271% to −0.300% across all quantiles (20th to 80th). This indicates that the implementation of environmental policies fosters adoption of energy transitions to mitigate the negative effects of climate change, particularly to reduce GHG emissions. Further, environmental-related technologies (ERTs) and green innovation (INV) decrease GHG emissions by 0.15%–0.13% and 0.967%–2.049%, respectively, across all quantiles, thus encouraging environmental sustainability. The heterogeneous effect of ERTs is due to varying levels of adoption of environmental technologies in sample countries. The findings highlight the crucial need for integrating environmental policy strictness and energy transition measures to effectively mitigate GHG emissions. It highlights the significance of adaptive, responsive policies that are in line with SDGs 7 & 13, which concentrate on sustainable energy practices and integrated climate action in OECD economies.

Graphical Abstract

Introduction

The issue of climate change and global warming has emerged as a prominent and pressing concern in the modern era (UNEP 2019). The escalation of hazardous emissions resulting from intensified human activities has resulted in significant environmental contamination, posing considerable global ecological challenges [28]. Over the past few decades, there has been a growing global recognition of the imminent necessity to take collaborative action to tackle global warming and shift towards a more sustainable environment. The OECD economies are at the forefront of this initiative. Their economies contribute substantially to global emissions and consumption of resources [5]. While the effects of global warming emerged apparent and the need for action became more urgent, the importance of strict environmental policies to assist with the transition toward sustainable energy has become an essential subject of discourse and research. In consideration of this, numerous environmental programs have been initiated and implemented in the past 20 years, aiming primarily to expedite the energy transition and foster low-carbon economies. These programs are intended to alleviate the adverse effects of environmental degradation [61, 74]. During the past few decades, environmental regulations have acquired substantial support and have established significant priorities in the strategic goals of states and international bodies to address the issue of climate change.

Therefore, this increased focus is apparent in collaborative efforts such as the 2015 Paris Agreement, which highlights ambitious attempts to tackle global warming. The stringent regulations aimed at reducing emissions to address climate change necessitate the adoption of robust regulations and governing structures that prioritize the protection of the environment. The strategy stipulated by the Paris Agreement and Kyoto Protocols involves the creation of regulatory frameworks and environmental policies that are specifically tailored to tackle the difficulties caused by environmental degradation and reduce its negative consequences [59, 67]. The importance of environmental policy at both the national and global levels has increased significantly in effectively dealing with issues such as contamination, depletion of resources, and an upsurge in carbon emissions [45, 76].

The global policy development structure has recognized the immediate need for sustainable and eco-friendly energy sources owing to the severe ramifications of excessive dependence on fossil fuels. This dependence leads to a surge in GHG emissions and the imminent exhaustion of renewable resources [89, 90, 92]. As a consequence, several countries have made it a priority to encourage the generation of renewable energy to support sustainable development [8]. The concept of the energy transition has constantly evolved as a crucial solution in the discussions around climate change at various UN environmental change conferences. It is imperative to achieve the ambitious 2.0 °C goal stipulated by the mutual agreement till 20230. Shifting from traditional energy use to integrating environmentally friendly energy sources has been widely accepted as an essential component in attaining SDGs [31].

However, it is crucial to recognize that the progress in ensuring energy accessibility has been unequal and varied throughout different global regions [48, 49, 56]. Hence, the accomplishment of a comprehensive energy transition remains distant and requires collaboration on a global scale. The energy transition is essential for mitigating the environmental degradation [60]. Although numerous industrialized countries have enacted regulations to protect the sustainability of the environment, inevitably, these countries consistently produce the greatest average levels of greenhouse gas emissions, a trend that persists to the present moment [65]. The OECD countries possess significant economic influence and have been significant in developing and evaluating strategies to address global warming within the United Nations framework [9].

Moreover, it had been anticipated that these developed countries would lead the way in sustainable development and economic growth by employing their capacity to invest in environmentally friendly technologies [3]. However, current evaluations of carbon emissions indicate an upsurge in emissions emanating from OECD countries [83]. Dam & Isik, [26] argue for the premise that industrialized countries, which often have higher literacy rates, would inevitably exhibit higher degrees of environmental concern among individuals. Consequently, it is imperative for policymakers in OECD countries to develop renewable energy regulations and environmentally sustainable measures to tackle the challenges caused by global warming.

Thus, resolving environmental catastrophes significantly relies on the policy objectives determined by governments and international authorities, as well as their strategic plans, which play a crucial role in describing environmental consequences [7, 33, 53]. By implementing these environmental policies, countries can successfully reduce detrimental emissions and improve energy efficiency, promoting sustainable growth and robustness in response to worldwide environmental concerns [37]. Hille et al. (2020) argued that to adequately benefit from environmental policies, it is crucial to adopt a long-term approach that ensures a uniform framework of regulations in the realm of environmental management. Policymakers have responded to the growing concern about climate change by implementing strict rules and prioritizing the challenging task of overhauling the global energy system [41, 68],Loorbach et al., 2017).

Why OECD countries? The OECD countries, renowned for their multifaceted economies and advanced facilities, significantly influence global energy consumption and GHG emissions. OECD countries are facing significant environmental issues, which are leading to unexpected effects on the environment. These repercussions pose a risk to the goals of addressing climate change. This study specifically evaluates the OECD countries because they heavily depend on fossil fuels, leading to a significant increase in GHG emissions. OECD countries account for approximately 36% of the overall emissions produced from fossil fuel-based energy sources. The industries in these countries heavily depend on energy and provide around 29% of world emissions, mostly due to their substantial reliance on fossil fuels (OECD 2021). The imperative for a universal transition towards clean energy is apparent since the escalating dependence on fossil fuels contributed to climate change by causing a surge in GHG emissions. OECD countries play a crucial role in this transition due to their significant energy extraction and consumption, technological advancements, and innovative environmental policies. Understanding the variables contributing to GHG emissions in these economies and emphasizing efficient strategies to decrease emissions is crucial for achieving SDGs and reaching global climate goals.

Therefore, it is imperative to develop a policy framework that would restructure present energy regulations to promote environmental sustainability. This argument asserts the significance of implementing a policy framework in OECD countries to accomplish climate action by adjusting environmental rules to align with SDGs. A comprehensive SDG framework is required to ensure adherence to the 2030 goal. Thus, the implementation of this analytical framework is crucial because of the intricate relationship between economy and the environment and the aim of achieving sustainable development in OECD countries. However, the current corpus of literature demonstrates two significant constraints. The main subject of this discussion is the developed nations and their higher susceptibility to the consequences of environmental change. These countries are projected to experience the most significant impact of global warming repercussions. Caglar et al., [19] due to reliance on non-renewable energy sources. Moreover, the increasing economic growth requires greater energy consumption, resulting in increased emissions that pose a substantial concern to both humanity and the environment. SDG 7 necessitates accessible, inexpensive, and sustainable energy.

To enhance policy effectiveness in OECD nations, regulators and policymakers should adequately outline the role of EPS. This will facilitate the development of more effective strategies to promote sustainability, mitigating the detrimental effects of GHG emissions. Therefore, it is imperative to focus on significant factors that facilitate policymakers in attaining SDGs. Strict environmental regulations are crucial for fostering consistent environmental strategies that facilitate the shift toward renewable energy sources. This argument contends for the requirement of a regulatory structure in OECD countries that promotes sustainable development by adapting environmental policies to meet SDGs (7 & 13). Thus, the objective of this study is to enhance existing knowledge by examining the moderating effect of EPS on the interplay of ET and GHG emissions by highlighting the capacity of OECD's environmental policy and law to synergistically promote sustainable development. Further, the OECD's allocation of resources towards INV, ERTs, and research and development (R&D) has the potential to alleviate the negative environmental impact resulting from their rapid economic growth. This study contributes to policymaking by suggesting the fundamental SDGs framework for OECD countries.

This research offers several contributions to the current literature in light of the preceding discussions and issues. First, the lack of empirical research on this subject, despite the pressing need to address climate change and compelling evidence in support of the energy transition and stringency of environmental policy stringency, motivates this study into the dynamic relationship between energy transition, green innovation, environmental-related technologies, and GDP, as well as the interaction of ET*EPS in OECD countries from 1990 to 2020. The fundamental objective of environmental and energy policies should be to promote the shift towards renewable energy sources, which are both environmentally sustainable and economically sustainable. Effective and appropriate environmental policies promote the shift from traditional energy sources to renewable energy sources. The Energy transition is a significant factor in adequately mitigating the effects of GHG emissions on environmental sustainability. The combination of energy transition and stringent environmental policies (ET*EPS) is essential for considerably enhancing the sustainability of the environment. Second, this study employs a novel cross-country EPS proxy index in our evaluation. The current work is distinguished from previous studies by implementing a distinctive approach that allows the Environmental Policy Stringency (EPS) index to impact all aspects of the environment.

Further, the Porter's hypothesis reveals that the impact of environmental restrictions on green practices differs among countries and regions, and the precise causal pathway underlying this effect is still unclear. On this basis, current research attempts to shed light on significant research questions by allowing this index to dynamically influence the model coefficients.

• (i) Does energy transition possess the potential to curtail GHG emissions in the case of OECD countries?

• (ii) To what degree does the implementation of environmental policies moderate the association between energy transition and GHG emissions in OECD countries?

• (iii) What is the extent of the effect of green innovation and environmental-related technologies on the reduction of GHG emissions in OECD economies?

• (iv) Does the Porter hypothesis hold valid when strict environmental rules are implemented in the OECD region?

This novel approach enables a thorough investigation of significant questions, leading to a broader comprehension of the complex association among environmental regulations, energy transition, and their combined effect on GHG emissions in OECD countries. Finally, in a discussion concerning the Illumination Global initiative, the World Bank highlighted the crucial nature of transitioning to sustainable energy sources to combat energy poverty. They additionally dealt with the potential of implementing policies to consolidate efforts in attaining the SDGs 7 & 13. This implies that the current economic strategies in developing nations, specifically those relating to energy and the environment, may require a change in approach. To achieve this, it would be required to implement a comprehensive framework for SDGs. In light of SDGs 7 & 13, there is a need to implement strict environmental rules to encourage affordable, accessible, and environmentally friendly energy sources. Moreover, the increasing economic growth entails more energy consumption, resulting in increased emissions and posing an enormous threat to both humanity and the environment. Therefore, it is crucial to choose the significant variables that assist policymakers in attaining the SDGs.

Therefore, this study provides a thorough analysis focused on improving comprehension of how EPS and ET effectively manage the complex challenges that arise from global warming. This study provides novel insights into the dynamics that are distinctive to OECD countries, based on an analysis of previous research and strong empirical bases. This will provide an extensive policy paradigm for achieving SDGs and reducing pollution through energy transition upon the completion of the empirical investigation. To address the lagging progress of these economies in achieving the SDGs, implementing a robust policy framework is suggested. This may assist in establishing a benchmark for aligning current policies in other emerging countries. An empirical framework that incorporates energy transition, green innovation, environmental policy stringency, and GHG emissions could provide a comprehensive policy agenda to achieve the objectives of SDG 7 & 13. When discussing the policy context, it may be beneficial to propose a step-by-step implementation plan. The strength of the policy structure depends on the political and economic relationships and structural analogies among these countries.

Therefore, an evolutionary integration approach for the SDGs and COP27 agenda might be recommended. Based on our understanding of existing literature, there is insufficient proof of a reintegration strategy employed to tackle environmental degradation, energy transition, green innovation, and environmental policy stringency. The study proposes a fundamental SDGs framework for OECD countries to make a policy contribution. The advancements achieved by OECD countries serve as testimony to the significance of statutory rules, with the OECD maintaining the lead in addressing climate change and executing the shift to renewable energy sources. It is necessary to align existing policies in OECD countries to establish a reform agenda focused on SDGs. This fundamental contribution is to construct an agenda focused on SDGs while considering the energy transition, environmental policy strictness, green innovation, and primary energy consumption's impact on GHG emissions. This could be utilized to describe the study's contribution. Moreover, this research establishes a framework for future concerns, stimulating numerous perspectives and depths of evaluation to further analyze this occurrence.

The remaining sections of this study are as follows: Sect. "Literature review" is review of literature, Sect. "Methodology" is Methodology, Sect. "Results and discussion" discusses the findings and discussion, and Sect. "Conclusion" concludes the research with policy suggestions.

Literature review

Global warming has emerged as the most contentious environmental issue in recent years. According to COP27, Greenhouse gases (GHG) and carbon dioxide (CO2) emissions are identified as the main contributors to global warming. Various scholars and government officials have recently highlighted a range of environmental factors. We evaluated various research studies and classified them into following distinct categories.

Environmental policy stringency (EPS) and environmental quality

The enormous challenge posed by global warming and its extensive repercussions requires urgent and collaborative efforts to attain sustainable growth [43]. Therefore, there has been considerable academic and policy interest in developing a thorough knowledge of the impact of human activities on the global climate change phenomenon and its ecological repercussions. In this perspective, GHG stands out as the main indication of environmental degradation that accelerates global warming, due to its role as the dominating factor [30, 88]. The effectiveness of ecological strategies in reducing GHG emissions has been studied by a particular group of scholars. According to most researchers, the OECD environmental policy stringency index is a credible measure for evaluating the effectiveness and robustness of policies pertaining to the environment [2]. Freire et al., [32] argue that the environmental policy stringency index should be used as a preliminary and concrete approach to evaluating the extent of environmental policy on a global scale over an extensive period. The study of Raihan & Tuspekova, [63] demonstrates that the strictness of environmental policies has emerged as a critical tool in addressing environmental degradation. Roy et al., [64] made estimations on China's CO2 emissions until 2022 by analyzing data from 1990 to 2012. Their findings demonstrate that implementing strict environmental policies can effectively cut emissions.

Furthermore, a recent study performed by [10, 15] revealed that environmental rules have a crucial role in facilitating the development of environmentally sustainable innovations, leading to a significant decrease in GHG emissions. The study of, Chen et al., [22] and Ullah et al., [77] indicated that stringent environmental strategies had a detrimental impact on GHG emission levels. The study findings of this investigation emphasize the necessity for rigorous environmental policies. Cui & Wang, [25] conducted a distinct empirical study to examine the impact of strict environmental regulations on GHG emissions. Their research spanned from 1993 to 2014, and the results demonstrated a robust association between GHG emissions and the degree of strictness in environmental strategies across the sample countries. The researchers revealed an association between emissions and environmental policy. The analysis demonstrated a one-way causation, indicating that the strictness of environmental regulations significantly influences greenhouse gas emissions. Further, Huang et al., [38] analyzed the impact of more stringent environmental regulations that have been implemented during the last 20 years. However, their investigation showed that more stringent environmental regulations have constrained the lasting effects on total production, largely demonstrating their influence during a brief timeframe. Zhang [91] conducted a study to investigate the influence of financial growth on CO2 emissions in six Asian countries. The study found that there is a significant correlation between economic growth and the levels of CO2 emissions in the sample economies. Polzin et al. (2015) examined the influence of government regulations on the advancement of green energy. Moreover, policy directions emphasize the significance of government investment in renewable energy sectors, while posing OECD countries to implement financial incentives to attract such investments.

Energy transition (ET) and environmental quality

The global transition to sustainable energy is primarily driven by the imperative to address environmental issues and mitigate the adverse effects of regional air contamination [17]. The role of energy consumption in generating a substantial amount of carbon dioxide emissions emphasizes the imperative to prioritize this domain. The combustion of fossil fuels is accountable for approximately 66% of global GHG emissions [16, 40, 44, 69, 70]. emphasize the importance of extending the global economy and promoting the use of renewable energy as an achievable strategy to combat global warming. Their findings demonstrated that industrialized countries typically employ more environmentally friendly technologies in their global trade activities, resulting in a gradual decrease in carbon emissions over a period of time. Yasmeen et al., [86] performed a study to examine the various variables that impact carbon emissions during the years 1980 and 2011. The experts revealed that the escalated utilization of fossil fuels plays a substantial role in the upsurge of GHG emissions. However, the greater use of renewable energy sources contributes to reduced energy consumption [18]. These findings suggest that promoting the widespread adoption of renewable energy sources is crucial for substantially tackling the threat of climate change.

An energy shift is essential to tackle global warming and improve sustainable growth. The achievement of sustainable development can be facilitated by considering several economic aspects in the context of energy transition [73]. The primary and crucial determinant is the Environmental Policy Stringency Index, which facilitates the advancement of energy transition. Energy transition is promoted through various environmental measures such as public policy, feed-in tariffs, carbon levies, and government surveillance. According to the Porter Hypothesis, a higher economic level stimulates innovation and enhances businesses' capacity for production, hence leading to an increase in the energy efficiency of the economy. Technological innovation and environmentally related technologies are essential for accelerating the energy transition [78]. However, significant green investment is necessary to enhance the energy infrastructure and meet the growing demand for renewable energy. Developing or recently developed economies might face challenges in growing their potential for development in their pursuit of the energy transition. Consequently, numerous countries depend on technological trade to facilitate the transfer of renewable energy sources across borders. However, it is important to recognize that increased investment can facilitate the transition to clean energy and provides substantial financial resources and promotes sustainable technological advancements.

Green innovation (INV) and environmental quality

Qin et al. (2021) examine the three aspects of green technical advances, composite risk index, and environmental policy in creating a sustainable environment by setting emission-free goals for the G7 countries. The empirical framework examines the interaction between renewable energy, GDP, and research and development (RE*R&D) from 1990 to 2019. The study's findings confirm the presence of the Environmental Kuznets Curve (EKC) in the G7 countries. Furthermore, RE*R&D, environmental rules, green innovation, and the composite risk index all help reduce GHG emissions. Conversely, GDP stimulates a significant increase in GHG emissions. Moreover, there are significant unidirectional causal associations among the composite risk index, environmental policy, green innovation, and carbon emissions. Also, there is a unidirectional causal relationship between interaction of renewable energy*research & development (RE*R&D), GDP, and carbon emissions. Erdogan et al. [27] performed a study in G7 economies on the dataset spanning from 1991 to 2017, emphasizing the influence of renewable energy on the environment. Their findings demonstrates that renewable energy decreases carbon emissions.

Numerous studies have been conducted to check the impact of green innovation on environmental sustainability, for instance [12, 20, 21, 55, 87]. Renewable energy is derived from sustainable and environmentally friendly sources, reducing carbon emissions and enhancing environmental quality for current and future requirements. In addition, Naseem et al., [57] assess the correlation between green innovation and carbon emissions in BRICS economies. They utilize monthly datasets from 1990 to 2017 and employ quantile-on-quantile regression for their analysis. The outcome from the investigation indicates that green innovation significantly reduces carbon emissions in all the BRICS economies. Kuang et al., [47] examined the relationships of technological developments, economic growth, and carbon emissions in the BRICS economies from 1990 to 2019 by utilizing the STIRPAT methodology. The findings indicate that the green innovation plays a crucial role in promoting the shift towards a sustainable environment by significantly reducing carbon emissions. On the contrary, economic growth impedes the development of a sustainable environment by boosting the release of GHG emissions. Green innovation adheres to environmental principles and the regulations of the environmental economy. The innovation strategy integrates the sustainable utilization of resources and energy, while simultaneously reducing pollution and limiting impacts on the natural environment. Therefore, the development of environmentally friendly technology is more effectively aligned with the goal of achieving sustainable development. [29, 90, 92], Li and Liao 2020).

Environmental related technologies (ERTs) and environmental quality

ERTs play a crucial role in decreasing Malaysia's reliance on fossil fuels for energy consumption between 1970 and 2009. Sharma et al., [66] investigated the association between ERTs and CO₂, GDP, and emission-free energy in Norway and New Zealand from 1971 to 2010. These findings also revealed the importance of technology in the analysis of the relationship between clean energy and economic development. Kisswani & Zaitouni [46], performed further research in Malaysia, which verified the positive effect of ERTs on the country's overall GDP from 1985 to 2012. A recent and comprehensive study conducted by Sohag et al. (2017) examined the effects of ERTs on CO₂ emissions in 24 European nations from 1980 to 2010. The study utilized advanced statistical methods such as autoregressive distributed lag (ARDL) and pooled mean group estimate to analyze the data. The study indicated significant negative consequences of ERTs on CO₂ emissions.

Sultana et al., [72] performed an investigation that concentrated on investigating the association among foreign direct investment (FDI), energy consumption, economic growth (EG), and carbon emissions in ASEAN countries. The results of the research indicate that foreign investments in these nations have a beneficial effect on environmental sustainability through encouraging cleaner and more efficient practices. Moreover, the study revealed that EG has an adverse effect on environmental conditions in countries with significant emissions. This implies that if there is a rapid growth of the economy without sufficient measures to protect the environment, it might contribute to a rise in carbon emissions and destruction to the ecosystem. These findings emphasise the importance of adopting sustainable development strategies to achieve an effective balance between economic growth and protecting the environment. Mardani et al., [54] conducted a study to analyze the associations between electricity consumption, CO₂ emissions, EG, and renewable energy from 1995 to 2017. They specifically emphasized on the association between CO₂ emissions and electricity consumption in a sample of both industrialized and developing countries. It has been determined that, in the short term, electricity consumption and EG has detrimental effect on CO₂ emission. However, the study revealed that the use of renewable energy sources yields a substantial reduction in long-term CO₂ emissions. These findings indicate that while renewable energy may not have a significant immediate impact on CO₂ emissions, it has a long-term effect. This illustrates the paramount significance of making persistent assurances and investments in renewable energy sources to effectively reduce greenhouse gas emissions. Countries can strive to alleviate the repercussions of environmental degradation and establish a more sustainable economy by scaling up their shift towards green energy and promoting its global development. Karaaslan & Camkaya, [42] conducted a separate investigation to examine the relationship between CO₂ emissions, economic growth, and the utilization of renewable energy in MENA countries. The empirical findings indicated that, except for unidirectional causation, there was no immediate causal connection between these factors. Over time, the findings indicated a unidirectional association between EG and the CO₂ emissions and renewable energy consumption. Furthermore, [80, 81] demonstrated that renewable a negative effect while EG is positively associated with CO₂ emissions. The long-term consequences of this phenomenon are increasingly significant, demonstrating that renewable energy is an effective substitute to traditional fossil fuel energy in mitigating ecological emissions.

Literature gap

In summary, the analysis of the existing literature in the preceding sections reveals significant deficiencies that this study aims to address. Specifically, although the OECD countries have a significant impact on global GHG emissions, there is limited knowledge about the factors which trigger or reduce an upsurge in carbon emissions within this group of countries. This significantly restricts the comprehension of the sustainable environment within these economies. This vulnerability allows the current study to be the first to provide comprehensive empirical insights on how to attain a sustainable environment in OECD countries after the COP27 conference. Furthermore, it is important to highlight that despite the emphasis on the renewable energy transition in the Glasgow pact, no empirical research has been carried out to validate the interactive role of environmental policies on the relationship between energy transition and GHG emissions in OECD countries. The Porter Hypothesis (PH) has been selected as the theoretical foundation for this paper due to its significant features. It is the first generally acknowledged hypothesis that can explain how environmental regulations "offset" the adoption of green practices. The Porter Hypothesis posits that stringent regulations contributing to higher manufacturing costs can serve as a catalyst for innovation and the adoption of sustainable methods (Porter and Linde, 1995). Governments and businesses in the OECD region strongly support the application of the Porter Hypothesis to environmental regulation. Figure 1 illustrates theoretical framework for the current analysis which incorporates an extensive set of variables, elaborating the insights provided by Dogru et al. (2019). This highlights the significance of environmental factors and other non-climatic elements in influencing the effectiveness and consequences of GHG reduction measures. The suggested framework attempts to enhance awareness of the intricate mechanisms associated with GHG mitigation by incorporating the combination of various factors.

Fig. 1

A theoretical framework of an extensive set of variables

Methodology

Data sources and variables

This research empirically analyses the dynamic effects of economic growth, renewable energy utilization, and green innovation on GHG emissions in OECD countries. Further, this study also analyzed the moderating role of EPS on the association of energy transition and GHG emissions. One of the main reasons to select these OECD countries is that energy consumption accounts for approximately 35% of global emissions, compared to over 50% in 1990. A more intricate depiction arises when emissions are examined from the perspective of the final consumer. Furthermore, the OECD nations for this study have been selected based on their credibility on a global scale for enacting strict environmental regulations, upholding robust economic frameworks, and aggressively promoting technology advancements within the overall framework of the environment. The top 36 OECD countries—which lead the way in energy transition, environmental policies implementation, green innovation—make up the study's sample (see Table A in the Appendix). The dataset employed ranges from 1990 to 2020 due to the availability of the data. Table 1 shows the description of various selected variables.

Table 1 Variables description

GHG emissions are used as a dependent variable to measure environmental quality. It is a contributor to the degradation of the environment, more specifically the cause of climate change. The manufacturing of concrete and the consumption of fossil energy sources (e.g., coal, oil, and natural gas) account for the majority of GHG emissions. The data for the variable is collected from world bank database (www.data.worldbank.org).

Energy Transition (ET) This variable is measured as % of total final energy consumption. The data for the variable is collected from world development indicators (WDI-World Development Indicators | DataBank worldbank.org).

Environmental Policy Stringency (EPS) The Environmental Policy Stringency Index (EPS) is a nation-specific metric derived from the Organization for Economic Cooperation and Development (OECD-OECD Statistics) in [58]. By including 14 environmental policy initiatives, which address issues such as global warming and air pollution.

Green technological Innovation (INV) This indicator is a proxy for the number of patents associated with green technologies. These technologies have minimal GHG emissions compared with conventional technologies, leading to a small effect on the environment. The data for this indicator are collected from OECD database (OECD Statistics).

Environmental-Related Technologies (ERTs) This variable is measured as % of all technologies. The data for this variable are collected from OECD statistics (OECD Statistics) database.

Economic growth (EG) is expressed by the Gross Domestic Product (GDP) statistic. The data for this indicator are collected from World Bank database (www.data.worldbank.org).

Theoretical underpinning

Energy Transition (ET) signifies the crucial shift from conventional energy sources to renewable sources. It is essential to monitor this shift to comprehend the advancement and influence of renewable energy integration in the OECD economies [6]. This variable contributes to evaluate progress towards sustainable energy generation and reducing emissions.

The Environmental Policy Stringency (EPS) metric evaluates the level of strictness of ecological regulations in every country. EPS offers a thorough examination of the regulatory structure and the degree of devotion to tackling environmental issues [83]. This variable assesses how strict environmental policies impact the economies under study.

Environmental Related Technologies is % of all environmental technologies. Environmental technology encompasses technologies or practices that impact the natural environment. It is often referred to as green technology or ecological technologies. It covers several sectors such as agriculture, transportation, and energy [39].

Green Technological Innovation (INV) employs specialized search methods to identify environmental technology advancements related to ecological management, climate change mitigation, adaptation, and sustainability [82]. Analyzing patents in this field provides valuable information on the technological progress and innovations that support environmental sustainability in the sample economies.

Utilizing interaction terms of environmental policy stringency and energy transition (ET*EPS) to analyze their effect on GHG emissions is an effective approach. This interaction term provides a more in-depth analysis of how these variables together impact GHG emissions concerning the strictness of environmental policies [14]. The variables are precisely selected to provide a thorough comprehension of numerous aspects crucial to the study's emphasis on energy transition, environmental policy stringency, green innovation, and environmental related technologies in the OECD economies. Integrating these variables enables a detailed examination of how environmental policy, technical progress, and energy dynamics interact to influence sustainable development strategies.

Empirical methodology

The empirical estimation method consists of seven steps described in the following sections and is displayed graphically in Fig. 2.

Fig. 2

Estimation method flow diagram

Using previous research as a basis, we have created a mathematical equation (I) that demonstrates the direct influence of energy transition, environmental-related technologies, green innovation, and economic growth on greenhouse gas (GHG) emissions. Additionally, the estimation consists of moderating effect of EPS on the relationship of energy transition and GHG emissions. Below is model:

$${GHG}_{it}=f({ET}_{it},{ERT}_{it},{INV}_{it},{GDP}_{it},{ET*EPS}_{it})$$

(1)

In this study the variable GHG represents the environmental quality, which is measured as total greenhouse gas emissions (Kt of CO₂ equivalent), ET represents energy transition index which is measured through renewable energy consumption (% of total final energy consumption). ERTs indicates environmental related technologies measured as (% of all technologies), INV is green technological innovation and measured as patents application, residents. EPS represents environmental policy stringency and is measured as EPS index developed by OECD.

The econometric model for study is based on (Awosus et al., 2022) and is specified as:

$${GHG}_{it}={\vartheta }_{0}+{\vartheta }_{1}{ET}_{it}+{\vartheta }_{2}{ERT}_{it}+{\vartheta }_{3}{INV}_{it}+{\vartheta }_{4}{GDP}_{it}+{\vartheta }_{5}{ET*EPS}_{it}+{\upvarepsilon }_{it}$$

(2)

In equation “t” and “i” demonstrate the time period (1990–2020) and cross-sections (OECD countries) while $\boldsymbol{\vartheta }$ (0–5) indicates the coefficients of the variables. This study employs GHG as dependent variable and energy transition (ET), environmental-related technologies (ERTs), green innovation (INV), Economic Growth (GDP) as independent variables. The study also evaluates the interactive role of environmental stringent policies (EPS) between the relationship of ET and GHG in sample countries.

Long run coefficients estimations

To examine the long run relationship among the selected variables, this study employs the panel estimation techniques, primarily, dynamic OLS(DOLS) developed by Kao et al., (1999), fully modified OLS(FMOLS) proposed by Pedroni (2004, 2007, 2001), and Canonical Cointegration Regression (CCR) suggested by Park (1992). The long run cointegration in the current study involved the estimation of the following equation:

$${GHG}_{it}={\vartheta }_{0}+{\vartheta }_{1}{ET}_{it}+{\vartheta }_{2}{ERTs}_{it}+{\vartheta }_{3}{INV}_{it}+{\vartheta }_{4}{GDP}_{it}+{\vartheta }_{5}{ET*EPS}_{it}+\sum_{i=-q}^{q}{\delta }_{1}{\Delta ET}_{t-i}+\sum_{i=-q}^{q}{\delta }_{2}{\Delta ERT}_{t-i}+\sum_{i=-q}^{q}{\delta }_{3}{\Delta INV}_{t-i}+\sum_{i=-q}^{q}{\delta }_{4}{\Delta GDP}_{t-i}+\sum_{i=-q}^{q}{\delta }_{5}{\Delta ET*EPS}_{t-i}+{\varepsilon }_{i}$$

(3)

In the above equation $\boldsymbol{\vartheta }$ and δ signify intercepts, ${{\varvec{\varepsilon}}}_{{\varvec{i}}}$ denotes error term, ∆ is the first difference operator and q represents the lag operators, t indicates the time trend and i signifies cross sections (OECD countries).

Fully modified ordinary least square (FMOLS)

By modifying the traditional OLS, the FMOLS estimator was developed to compute the cointegration correlation. It accounts for endogeneity and serial correlation, which are typically present while using traditional OLS. FMOLS assists in correcting genetic factors and predictions. When calculating cointegration or long-run coefficients, FMOLS performs better than other econometric approaches. The FMOLS employs unilateral long-term covariance matrices and initial estimations of the symmetric residuals. As a consequence, an adjusted ordinary least square (OLS) estimator is generated, which reflects a normal distribution and is asynchronously unbiased. FMOLS provides several advantages, particularly the ability to alleviate small sample bias and effectively resolve statistical concerns related to serial correlation and endogeneity problems [79].

Dynamic ordinary least square (DOLS)

A parametric technique termed DOLS introduces lag values to the model at the first difference to correct autocorrelation. The main advantages of the DOLS methodology over the FMOLS method are as follows: (i) Small sample sizes are supported;(ii) dynamic components are present in the model; (iii) refractions in static regression are resolved; and it may be used for an array of variables. DOLS supports eliminating secondary biases and enhancing systemic trends in the research. The DOLS method can be used for both stationary and non-stationary variables to provide accurate estimates for both short and long-term trends. Moreover, the DOLS method incorporates both lagged and leading variables in the cointegration analysis process and retrieves them orthogonally. The standard format of the DOLS model, which incorporates amplification of cointegration regression, is illustrated by the equation below.

$${y}_{t}={X}_{t}\vartheta +{D}_{1t}{\gamma }_{1}+{\sum }_{j=q}^{r}{\Delta X}_{t+j\sigma }+{v}_{it}$$

where ${{\varvec{v}}}_{{\varvec{i}}{\varvec{t}}}$ is error term, j denotes lags operator, ${{\varvec{X}}}_{{\varvec{t}}}$ signifies the independent regressors (ET, ERTs, INV, GDP, ET*EPS). ${\Delta {\varvec{X}}}_{{\varvec{t}}+{\varvec{j}}{\varvec{\sigma}}}$ is the first difference of independent variables, ${{\varvec{y}}}_{{\varvec{t}}}$ denotes dependent variable (GHG emissions). The DOLS estimator implies that the predicted long-term association of two variables is capable of being derived by combining the r leads and q lags of several regression coefficients [23].

Canonical cointegration regression (CCR)

CCR analyses the long-term relationship between a dependent variable and its predictors by regressing the independent variables at various time lags on their specified values. The regression analysis utilizes the vector cointegration technique to identify the long-term equilibrium while maintaining the validity of the study variables. Employing this technique, however, proves to be economically viable and critical for resolving the linear regression aspect (Park and Zhao, 2010). Contrary to the FMOLS technique, the CCR determines the long-run association between the cointegration equation and stochastic regress errors employing a stationary conversion approach [84]. Asymptotically normally distributed square estimates are generated through this approach. This method simultaneously decreases endogeneity and corrects for asymptotic bias resulting from the synchronous correlation among innovations and their regressor. The underlying equation, which applies in more general terms, is used to express CCR estimations:

$${y}_{it}^{*}={\vartheta }_{0}+{\vartheta }_{1}{X}_{1it}+{\vartheta }_{2}{X}_{2it}+\dots +{\vartheta }_{k}{X}_{kit}+{\varepsilon }_{it}$$

In the above equation y denotes dependent variable, X₁, X₂,….. X_k denotes the independent variables while $\boldsymbol{\vartheta }$ (0-k) denotes the coefficient of parameters. ɛ denotes the error term.

Method of moment quantile regression (MMQR)

Furthermore, the present study expands its investigation by employing the MMQR (Method of Moments Quantile Regression) technique proposed by Machado & Silva (2019), relying upon the previously established frameworks that regulate GHG emissions. Traditional panel quantile regression techniques can accurately predict outliers but cannot detect unexplained variability in the panel. The MMQR, compared to typical quantile regressions, incorporates "conditional heterogeneous covariance effects" to achieve its objectives by considering dependent variable extracts along with the entire data distribution. The MMQR technique enables the assessment of distributional and heterogeneous effects over different quantiles (Aziz et al., 2020). Furthermore, it effectively depicts empirical data on the association of the parameters of research, while considering the uniform influence imposed by distribution disparities.

In the nonlinear model, the MMQR technique delivers accurate estimations and adequate data for generating non-crossing coefficients in quantile regression. The following equation is employed to generate the conditional quantiles Qy(τ|X) for the location-scale variant framework:

$${\varvec{QY}}\left( {{\varvec{\tau}}{|}{\varvec{X}}_{{{\varvec{it}}}} } \right) = \left( {{\varvec{a}}_{{{\varvec{it}}}} + {\varvec{\delta}}_{{\varvec{i}}} \left( {\varvec{\tau}} \right)} \right) + {\varvec{X}}_{{{\varvec{it}}}} \vartheta + {\varvec{Z}}_{{{\varvec{it}}}} {\varvec{\gamma}}_{{\varvec{q}}} \left( {\varvec{\tau}} \right)$$

(4)

Where ${X}_{it}$ is vector of parameters that improve ET, ERTs, INV, GDP, and ET*EPS. Quantiles for the predictor parameters (GHG) are distributed based on the premise that the values rely on the pattern of distribution (location) of the exogenous component Y_it. Individual (i) and quantile (τ) Fixed effects are represented by the scalar coefficient demonstrated ${a}_{i}$(τ) = ${a}_{i}$+${\delta }_{iq}(\tau )$. Intercept shift does not reflect a distinct influence, unlike usual fixed least-squares effects. These factors remain stable across time and can have different effects on the conditional distributional quantiles of the endogenous component [1].

Results and discussion

The study analysis commences with examining the slope of heterogeneity, stationary behavior, and cointegration characteristics of the variables. Subsequently, the empirical analysis is conducted to estimate the long-term association among the study variables. The description of data is presented in Table 2. The evaluation of the empirical findings starts by employing descriptive statistics to present a concise statistical overview of the dataset in the present research. At this stage, the study employs a logarithmic transformation of the data to obtain reliable, coherent, and precise results. Results illustrates that GHG and GDP have the highest average values of 11.81731 and 4.332254, respectively.

Table 2 Descriptive statistics

This suggests that OECD countries are highly developed nations with substantial GHG emissions. As per energy transition (ET), environmental related technologies (ERTs), and Green Innovation (INV) are concerned, the maximum value are 5.457312, 4.416307, and 2.05602, and the mean values are 0.869779, 2.404845, and 1.48089 with standard deviation of 1.324072, 1.043566 and 0.238906, respectively. The interactive term of ET and EPS indicates an average value of 1.439673 with 1.580523 standard deviations, 6.660284, and −6.63892 maximum and minimum values, respectively, which indicates that environmental regulations foster the association of ET and GHG emission in OECD countries.

Furthermore, the correlation matrix estimates the extent of the relationship among regressors and regressand.

Table 3 demonstrates that ET, ERT INV and interaction of ET*EPS are negatively associated with GHG emission while GDP is positively related to GHG emission due to increase of human activities and more energy consumption. The overall results indicate that there is no issue of multicollinearity among study variables.

Table 3 Correlation matrix

Testing for cross-dependence (CD) becomes essential before checking for cointegration, as neglecting CD can result in biased and inaccurate outcomes. The Pesaran (2004) CD test rejects the null hypothesis of no cross-sectional dependence. Therefore, we can deduce that the series are independent when considering to each other.

The CD test results are indicated in Table 4. The results demonstrate that estimated values indicate the presence of CD in the data, thus the null hypothesis is rejected at a 1% level of significance.

Table 4 The pesaran (2004) CD test

Despite the interdependence among countries, it is still feasible for countries to have their distinct strategies. Therefore, it is important to investigate variations between countries. Thus, after analyzing the CD, we evaluated the slope of homogeneity of variables by the application of the Pesaran and Yamagata (2008) and Blomquist, Westerlund (2013) slope homogeneity test based on ∆ and ∆^^ adjusted. Following equation is used to for this test:

$$\Delta_{{{\mathbf{Slope}} - {\mathbf{Heterogeneity}}}} = ({\varvec{N}})^{\frac{1}{2}} \user2{ }\left( {2{\varvec{K}}} \right)^{{ - \user2{ }\frac{1}{2}}} \user2{ }\frac{1}{2}{\hat{\mathbf{s}}} - {\varvec{k}}$$

The adjusted delta tilde values are calculated using above equation by subsequent expression:

Blomquist and Westerlund (2013) introduced a HAC extension, expanding upon the work of Pesaran and Yamagata (2008). The HAC robust test statistic is described as:

$${\Delta }_{HAC}=\sqrt{N}(\frac{{N}^{-1}{S}_{HAC}-{k}_{2}}{\sqrt{{2k}_{2}}})$$

The findings summarized in Table 5 indicate the presence of country-specific heterogeneity within these economies.

Table 5 Homogeneity of slope

The findings indicate that the slopes reflect heterogeneity while the null hypothesis is strongly rejected at a significance level of 1%. This demonstrates that GHG emissions, ET, EPS, INV, and GDP differ across the sample OECD countries.

Considering the presence of CD and the heterogeneous nature of the slopes, the subsequent approach involves testing the unit root/stationarity of each series by applying IPS, Fisher Type, LLC and CADF unit root tests. These approaches determine whether the variables exhibit mean reversion or not. The presence of a unit root in the data results in misleading estimates of elasticity. These techniques are stronger compared to conventional unit root tests due to their ability to address CD and produce accurate outcomes for panel data with slope heterogeneity concerns. This paper utilizes first and second-generation unit root tests to determine the stationarity of all variables (Table 6).

Table 6 Unit root tests

The cointegration tests of Kao (1999), Pedroni (1999,2004), and Westerlund (2005) are performed under the null hypothesis of no cointegration following the stationary tests. The estimates are presented in Table 7. The p-value is significant and test validate the existence of a long-run relationship among selected variables i.e., GHG emissions, ET, EPS, INV, and GDP with 1% significant level and thus rejecting the null hypothesis.

Table 7 Cointegration test

Therefore, we can infer that there is a consistent and stable long run association across the selected variables, indicating that long-term estimating techniques can be employed.

Following the completion of the preliminary examination, then long-term estimation of the association between the panel variables is analyzed. DOLS, FMOLS, and CCR are employed to assess the coefficient outputs and the long-term association across the variables of consideration.

The results demonstrate that there is negative association among energy transition (ET) and GHG emission for all three DOLS, FMOLS and CCR tests. In the sample countries, there is a reduction of 0.1215, units in GHG emissions for every one-unit increase in energy transition in long run. Therefore, implementing energy transition measures appears to be a promising strategy for reducing GHG emissions in the panel countries, thereby improving the quality of the environment. These findings are aligned with the study of Pattak et al., [62]. Similarly, FMOLS and CCR results also demonstrate negative association between ET and GHG emission indicating that 1 unit rise in ET decreases emission by 0.2415 and 0.2572 unit, respectively. This argue that advancements in technology enhance a country's ability to substitute detrimental resources with sustainable alternatives. To address environmental challenges, countries are able, for instance, to transition from conventional energy sources to renewable energy sources.

The statistical findings derived from the DOLS, FMOLS, and CCR methodologies provide confirmation that environmental-related technologies have a substantial effect in reducing greenhouse gas (GHG) emissions. The primary findings assert that environmental technology has the potential to effectively reduce greenhouse gas emissions. Based on the estimations performed employing the DOLS, FMOLS, and CCR techniques, this demonstrates that a 1% increase in environmental technology contributed to a reduction in emissions of 0.2424%, 0.2595%, and 0.2563%, respectively. These findings are in line with the findings of Awosusi et al., [11]

Furthermore, advancements in technology have a substantial and negative environmental impact. The results indicate that for every further unit of green technological innovation, there is a drop of 1.4217 units in greenhouse gas (GHG) emissions in the DOLS, -1.0509 units in FMOLS, and -1.0471 units in CCR. The analysis suggests a substantial and positive association between technological advancements and environmental quality in OECD countries. The ongoing process of innovation, including research and development (R&D), advancements in technology, and other types of innovation, directly impact energy consumption and industrial efficiency. Consequently, the implementation of innovative solutions can effectively decrease greenhouse gas (GHG) emissions. Furthermore, actively encouraging technological advancements can assist these nations in transitioning towards more environmentally friendly economies. The use of environmentally friendly technologies and clean energy consumption is anticipated to be able to achieve 90% of global GHG reduction goals (Cagler et al., 2024f; [80, 81, 93]), but it depends on implementing appropriate green policies to support sustainable development.

Furthermore, the results of interaction of EPS*ET indicates that estimates are empirically statistical at 1% level. This demonstrate that EPS moderates that association of ET and GHG emission. This posits that 1% increase in ET with EPS contributes to reduce GHG emission by 0.2787%, 0.3334% and 0.3413% in all three tests, respectively. Economic growth leads to increased industrial activity and fossil fuel consumption, leading to elevated GHG emissions. To mitigate GHG emissions and address the issue of environmental degradation, it is necessary to achieve an optimal equilibrium among development, investment, and environmental sustainability. The major objective of countries and governments is to mitigate environmental pollution while minimizing environmental degradation. To accomplish these objectives, it is imperative to enforce strict environmental regulations. Neglecting to address these challenges could have adverse implications for the economy. Hence, it is imperative to implement substantial measures to mitigate pollution while simultaneously fostering expeditious economic growth.

Several researchers suggest that implementing stringent environmental policies effectively promotes the use of renewable energy in developed countries [51, 75, 94]. This recommendation depends on the adoption of the EPS Index revealed by the OECD statistics. However, a contrasting perspective is provided by a recent study by Bashir et al., [13] that employs the EPS index to analyze the OECD countries and stated that more stringent environmental regulations possessed adverse effects on the adoption of renewable energy sources in OECD nations. The contradictory findings pose a significant challenge for policymakers in determining the appropriate direction to pursue. Therefore, our research findings provide a better comprehension of how the level of strictness in environmental policies affects the transition to green energy practices. Thus, our findings provide further evidence of the efficacy of environmental regulations in stimulating the transition towards clean energy sources. In conclusion, our research findings confirm the premise that more stringent environmental regulations are likely to promote the transition towards renewable energy sources in OECD countries.

Furthermore, the results of this research suggested that implementing environmental taxes and transitioning from conventional energy sources to renewable energy sources are effective strategies and approaches for mitigating pollutant emissions. Moreover, climate change regulations can serve as effective measures to reduce GHG emissions while ensuring economic growth. These conclusions are further validated by the theory and recent literature by Li et al., [50], which highlight the importance of promoting alternative sources of energy. The results of these studies have validated the notion that environmental regulation catalyzes the energy transition in OECD countries. The majority of OECD members have already implemented measures to enhance their environmental regulation by optimizing their processes to achieve superior outcomes. This assertion revealed that the strict environmental regulations are voluntary decisions for governments determined to reduce their GHG emissions, such as under the Kyoto Protocol. The objective is to contribute to minimizing the effect of GHG emissions on climate change and to minimize the reliance of many countries on fossil fuels while transitioning towards environmentally sustainable development. From these findings, it can be argued that governments of OECD countries are implementing regulations and taking actions to develop green economic growth to protect against climate change and resource scarcity, with an emphasis on energy consumption. Many countries have widely implemented restrictions such as environmental taxes on non-green transportation and fuels, along with programs to encourage the consumption and production of renewable energy. Therefore, strict environmental policies are anticipated to assess the effectiveness of economic environmental regulations by promoting green economic growth through the energy transition, increased recycling, eco-efficient technology, and reducing toxic emissions and resource depletion.

Moreover, in order to validate the results of these estimation of DOLS, FMOLS and CCR, the study employs the FGLS techniques. The results demonstrate that ET, ERT and INV are negatively associated with GHG emission and contributes to lower the GHG emissions in Sample countries. While GDP is contributes positively indicating that 1% rise in EG increases 0.5008% emission in sample countries. Whereas, EPS further strengthen the association of ET and GHG emission in OECD countries. These findings are consistent with the results of Hardi et al., [35]. As a conclusion on preliminary results, it is contended that environmental rules and policies can be strengthened to effectively accomplish the SDGs (13 & 7) and COP27 (Table 8).

Table 8 Panel cointegration test

Following the estimation of the long-term coefficient using DOLS, FMOLS, and CCR methods, then the current study employed MMQR estimations. Heterogeneous linear estimation methods exhibit variation in the magnitude of coefficients while retaining proximity to the size stipulated by the different requirements. To adhere to the specifications, we employ the MMQR method to evaluate the various impacts of the explanatory variables across an extensive spectrum of quantiles in the conditional distribution of greenhouse gas (GHG) emissions. The estimated outcomes are presented in Table 9.

Table 9 MMQR analysis

First of all, ET is found significantly negative with GHG emission at all quantiles, i.e., (0.20–0.80), this indicates that shift from conventional energy sources to renewable energy sources contributes to lower the GHG emission and helps countries to achieve the target of emission free economy. Similarly, the coefficients of ERTs and INV are negatively associated with GHG emission across all quantiles (0.20–0.80) ranging from -0.25915 to -0.13876 for ERTs and from -0.96655 to -2.04934 for INV. The coefficients of ERTs are heterogeneous while INV has increasing trend. A possible reason of heterogeneous results of ERTs is that in panel countries the level of adoption of environmental related technologies is different. Whereas, green innovation contributes to foster the environmental sustainability. These finding are similar with the findings of [34]. They argued that the adoption of more environmentally friendly technology and green innovations facilitates the restructuring of the nation's strategy to promote sustainable development.

The concept of green growth has effectively highlighted the significance of environmentally friendly technologies in enhancing the sustainable practices of enterprises and industries. Progress in innovation can improve the efficiency of the industrial sector, contributing to distinguish resource utilization and environmental repercussions from unrestricted development. Economies must promote environmental innovation in different aspects of businesses, including resource-efficient manufacturing, renewable energy sources, water and waste management, solid waste power recuperation, recycling, and sustainable tourism, to reduce environmental degradation. GDP is positively associated with GHG emission across all quantiles. This assertation posits that the substantial adoption of renewable energy sources drives up domestic production, thereby enhancing economic growth and GHG emissions. These findings are similar with the findings of Afshan et al., [4]. They examined the impact of renewable energy transition, green innovation and environmental policy stringency on the ecological footprints of OECD countries from 1990 to 2017 by employing MMQR approach.

Finally, the interactive term of ET and EPS (ET*EPS) shows a significant and negative association across all quantiles ranges from −0.27095 to −0.30012 which indicates that environmental regulations foster the energy transition and thus reduces the GHG emission. The success of environmental policy in decreasing GHG emissions during the energy transition depends on elements such as policy structure, encouraged technologies, and the broader economic and political environment. Environmental regulations and incentives frequently encourage the use of green energy sources practices such as energy efficiency, renewable energy, and emissions reduction [85]. However, an encouraging, attainable, and immediately implementable regulations can play a role in shifting public and industrial behaviour toward sustainable economies and environment. Stringent environmental regulations can increase the expenses associated with regulatory compliance, but the long-term advantages may transcend these costs [1]. A transition towards renewable energy, being a cleaner alternative to fossil fuels, might be encouraged by the rise in energy prices resulting from energy taxes. This could lead businesses and consumers to invest more in green resources, such as wind and solar technologies, thus encouraging the manufacturing and consumption of renewable energy sources.

Environmental regulations may need to be amended or improved in specific situations to achieve their intended objectives. When creating strategies to decrease GHG emissions in OECD nations, policymakers need to consider how environmental policy stringency and the energy transition interplay. Effectively transitioning to cleaner energy sources and decreasing greenhouse gas emissions can be achieved by precisely integrating the advancement of cleaner energy technologies with suitable governmental incentives and regulations. At the COP27 Summit, OECD representatives emphasized this aspect. Therefore, policymakers in the OECD should take into account these factors when designing regulations pertaining to GHG emissions, as any modifications in these variables will impact GHG emissions.

In summary, the study posits that energy transition, green innovation, environmentally friendly technologies, and environmental policies could be effective in promoting environmental sanitation and achieving SDGs (7 & 13) and COP27 objectives in major emitting countries. Moreover, the implementation of environmental regulations, energy transition and energy-related policies can serve as an effective approach to achieve a climate devoid of emissions and promote the use of renewable energy sources in OECD countries [52]. These approaches have the potential to achieve reduced GHG emissions, reduced environmental problems, and enhanced economic development. Particularly, the climate change challenges in developed countries are driven by the energy consumption (fossil fuels, oil, coal, gas, etc.) and industrial processing and economic growth. Progressively, the globe needs modifications, transformations, and technical advancements to achieve greener production and sustainable development. Through the enactment of environmental regulations, businesses enhance their research and development (R&D) investment, shift from conventional energy sources to renewable energy sources, and optimize their manufacturing processes, resulting in a reduction of greenhouse gas (GHG) emissions. The ET in conjunction with stringent environmental restrictions, holds the utmost potential to establish a sustainable development paradigm for countries to achieve the SDGs and COP27 objectives. The outcome will support OECD nations in attaining SDGs 7 and 13. Figure 3 demonstrates the impact of independent variables on explained variable (GHG emissions) across different quantiles. The overall trends demonstrate that ET, INV, ERTs, and interaction ET*EPS contributes to lower the GHG emission while GDP enhances the environmental degradation in sample countries.

Fig. 3

Graphical illustration of outcomes across different quantile

Robustness check

Furthermore, in order to validate the findings of MMQR, this study used the non-parametric approach bootstrapped quantile regression (BSQR). The findings in Table 10 demonstrate that ET, ERT, INV are negatively associated with GHG emission which validates the outcomes of MMQR. Further, findings demonstrate that GDP is positively linked with GHG emission. Results also indicates that EPS moderates the relationship of ET and GHG emission. These findings of interaction of ET*EPS validates the results of MMQR. Overall, the robustness test confirms the findings of the core model MMQR.

Table 10 Non-parametric BSQR approach

The preceding discussion enables us to conclude that current policies and rules may require more structuring to alleviate overall negative environmental impacts resulting from increasing economic development and fossil fuel consumption. Implementing such trailblazing policies can be essential in achieving distinct sustainable development goals (SDGs: 7, 10) and COP27 objectives. The SDGs encompass objectives such as promoting environmentally friendly and sustainable economic growth, ensuring universal access to clean and affordable energy, and fostering sustainable development.

Panel causality test analysis

Finally, we analyze the causal relationship between the explanatory variables and the explained variable. The MMQR method reveals the connections between variables at different quantiles, but it does not provide a causal explanation for these associations. To develop effective strategies, it is essential to understand the paths of these interactions. Considering the presence of the CSD among the variables, we can utilize conventional causality approaches, such as the causality test developed by Dumitrescu and Hurlin (2012) to analyze causality among study variables.

This test considers the presence of different characteristics in panel data and establishes a causal relationship by conducting separate regressions for each set of data, as compared to previous tests that examine panel causality as a whole. Further, the W-bar is used to calculate average statistics, whereas Z-bar statistics, which represent a typical distribution of normality, are used to evaluate the significance of the causality. The outcome of this investigation is summarized in Table 11. Results demonstrate that the independent variables substantially influence GHG, suggesting the presence of a bidirectional causal relationship among explained and explanatory variables in OECD countries.

Table 11 Dumitrescu and Hurlin (2012) Causality test

Conclusion

Environmental degradation, a highly significant global issue, is primarily triggered by excessive GHG emissions in the Earth's atmosphere. This issue entails significant ramifications and has been recognized as a prominent concern. The present study aims to assess the impact of the environmental policies stringency on the transition towards renewable energy in OECD nations from 1990 to 2020, with the goal of reducing GHG emissions and contributing to the achievement of SDGs 7 and 13. Energy consumption is referred to as a paradoxical situation. Restricting energy consumption can have a detrimental effect on economic progress, while excessive consumption can be detrimental to the environment. For an economy to thrive, it is crucial that it regularly adapts and enforces stringent environmental rules, while also embracing and integrating innovative concepts and technology. This will ensure that the economy's learning process is constantly developed and maintained timely. The study employed modern econometric methodology, specifically DOLS, FMOLS, CCR, and MMQR approaches. The empirical findings were validated for cross-section dependency employing the latest relevant tests.

The findings indicate that effectively tackling climate change and mitigating GHG emissions necessitate the implementation of stringent environmental rules and a transition towards renewable energy sources. ET, ERT, and INV have a negative impact on GHG emissions [48, 49]. The current environmental regulations in OCED countries tends to encourage the energy transition to lower GHG emissions. Thus, implementing stringent environmental policies promotes a shift from conventional energy sources to renewable energy sources, innovation, and technological advancement, enabling the implementation of alternatives such as pollution capture, adoption of eco-friendly technologies, and green innovative framework. R&D is essential for the shift towards a low-emission economy and for mitigating the adverse effects of GHG emissions. Further study findings suggest that the OECD must set hostile targets for decreasing emissions that align with the aims of the Paris Agreement, SDGs, and COP27 objectives. To limit the global temperature, increase to below 2 °C, countries must accelerate the transition to clean energy. To achieve a net-zero emissions target by 2050 and limit global warming to 1.5℃, it is crucial to promptly and significantly improve environmental regulations.

The OECD countries, comprising highly advanced economies, exert a significant influence on worldwide GHG emissions [36]. Despite making substantial progress in environmental policies and transitioning to renewable energy sources, these countries are still experiencing a rise in emissions. The surge can be attributed to various factors, such as industrialization, escalating consumption of non-renewable energy sources, and dependence on fossil fuels. In spite of attempts to decrease emissions, the combination of economic growth and the demands of modern lifestyles persistently exert strain on GHG emissions in these countries. It is imperative for OECD nations and the global community to give high priority to sustainable development, shift towards low-emission economies, and implement comprehensive strategies to reduce GHG emissions to effectively tackle climate change [71]. In order to tackle the challenge's worldwide extent, it is necessary to provide assistance to international collaboration, execute stringent environmental regulations, and provide resources to renewable energy. Efforts must be made collaboratively to mitigate the impacts of climate change and assure a sustainable future for humanity [24]. Eventually, this study conducted a robustness test to reinforce the conclusions of primary study models.

Policy implications of the study

In light of study findings, some policy recommendations are suggested as follows:

The findings indicated that OECD countries acknowledge the importance of the energy transition. However, their approaches vary not only in terms of economic potential and effectiveness but also in global agreements and goals aimed at mitigating the impact of human activities on environmental issues. Due to the intricate nature of the environmental degradation phenomena and the associated socioeconomic and technological challenges, it is necessary to implement following policy measures:

(To achieve climate neutrality by the end of the century, it is necessary to implement systematic reforms. Due to the extensive changes required the climate transition will include substantial modifications that are unparalleled in recent economic history within a very short timeframe. OECD countries need to enhance the consumption of renewable energy sources including wind, solar, hydro, and geothermal power to reduce GHG emissions effectively. OECD nations can invest in renewable energy infrastructure and offer subsidies for individuals and businesses to transition to renewable energy sources. National governments must adopt explicit, translucent, and comprehensive policy structures that are in line with global climate change and the SDGs to ensure that their policies, investments, and practices are influenced by the appropriate indicators. Climate action strategies must prioritize environmental effectiveness, economic accountability, and public support while ensuring the inclusion of vulnerable communities during the transition. It is imperative for governments of OECD countries at all levels to establish appropriate subsidies to redirect financial resources away from projects that contribute to high levels of emissions and do not promote sustainability. Although there has been some advancement, regulations, government revenue, and commercial interests remain closely connected to fossil fuels, activities that produce high levels of emissions, and activities that follow a linear approach. Immediate and profound measures are required to shift funding towards significant and transformational activities. The implementation of suitable regulatory structures is necessary to facilitate the development of these technological advancements, ensuring that new technologies become economically feasible, capable of attracting private investment, and able to generate profits. Businesses emphasized the importance of government intervention in ensuring access to emerging technology and facilitating access to current ones, hence fostering R&D activities. Significant modifications in financial flows and a realignment of investments are necessary to synchronize energy with a favorable economic and sustainability trend.

The association between stringent environmental policies and energy transition (ET*EPS) has the capacity to play a vital role in reducing GHG emissions in OECD countries. Following are a few recommendations on how to accomplish this: Promoting the use of sustainable energy sources: Shifting from fossil fuels to renewable energy sources is a very effective approach to reducing GHG emissions. Environmental regulations can encourage the advancement and use of sustainable energy sources that include wind, solar, and hydropower. Offer platforms or networks for OECD nations to share successful case studies, best practices, and technological developments related to the green transition and sustainable technologies. International Collaborations: Facilitate cross-border collaboration and knowledge-sharing initiatives across OECD countries to use diverse expertise and experiences in promoting green technologies for the purpose of reducing emissions. In summary, the association between the strictness of environmental policies and the shift towards cleaner energy sources has the capacity to create a positive cycle that results in reduced GHG emissions in OECD countries. Collaboration between governments and companies can be crucial in promoting a sustainable and environmentally friendly future. This can be achieved by prioritizing the development of renewable energy sources, implementing energy-efficient practices, encouraging low-emission innovation, and investing in emission capture and storage technologies. Policymakers should prioritize the energy market to accomplish the net-zero emissions target set at COP-27 and SGDs agenda.

OECD countries have the potential to significantly contribute to the objective of attaining net zero emissions by 2050. To achieve this objective, it is essential to enhance the utilization of both market and non-market environmental policy resources, in addition to implementing technical support policies, to encourage the adoption of sustainable energy. One approach is to enhance the stringent policies that impose a financial impact on emissions, such as CO2 trading schemes, renewable energy trading schemes, and energy taxes. This would result in higher costs for energy consumption that contribute to pollution. To reduce overall energy consumption and the consequent emissions, develop extensive energy efficiency measures targeting the transportation, residential, and manufacturing industries. Techniques of conservation: Encourage conservation activities, such as promoting energy-efficient practices, optimizing industrial processes, and minimizing waste across all sectors. Ultimately, in OECD nations, inadequate awareness among citizens can exacerbate the increase of GHG emissions. Individuals may be less inclined to mitigate GHG emissions if they lack comprehension of their daily activities and its environmental impact.

Limitations of the study and directions for future research

This research study has particular limitations that require consideration. In identifying the constraints that may have influenced the analysis, it is crucial to address the limitations of the study. More precisely, the study's limitation arises from the fact that it only considers data for the OECD countries from 1990 to 2020. This study has only primarily performed for developed nations due to limited data availability. Exploration of developing countries should be considered in the future, once sufficient data is available. This limitation narrows the study's emphasis to this particular region and period. Thus, the findings' applicability to global contexts is constrained by the lack of comparable data beyond the OECD countries. Primarily, by just concentrating on environmental regulations and the shift to renewable energy, green innovation, and environmental technologies the study may not offer a thorough comprehension of all the components that contribute to emissions. Moreover, the study exclusively concentrates on OECD countries. Although this selection enables a concentrated examination of nations with comparable socioeconomic contexts, policy structures, and energy profiles, it also restricts the applicability of the findings. Regions and countries outside the OECD might feature unique socioeconomic circumstances, varying policy structures, and varied energy profiles, which could result in disparate outcomes. Hence, it is recommended to take vigilance when attempting to generalize the findings of the study to countries outside the OECD. To overcome these constraints, future research efforts could investigate a more extensive array of factors associated with environmental change. Researchers can develop a deeper knowledge of the issues posed by global warming by examining a wide range of variables in many contexts. Therefore, future research attempts should aim to broaden the geographical and period range, integrate various aspects, and use further robust analytical methods i.e., MG, PMG-ARDL, and CS-ARDL approaches to tackle these limitations. Moreover, employing diverse methods and approaches can enhance the generation of a broader spectrum of insights and prospective solutions. Future research can enhance the effectiveness of addressing the critical issue of global warming by implementing a more broad and diverse approach.

Table 1 illustrates the selected study variables, a description of these variables with suitable adopted proxies. This table also demonstrates the sources of the data

Appendix

See Table 12

Table 12 List of sample countries