Impact of productive capacity shifts, energy-related R&D investments, energy use, and income on environmental degradation: Evidence from leading developed countries

Abstract

Environmental degradation (ED) has emerged as a significant challenge against the increasing demands of modern civilization. Therefore, transforming the economic structure into an eco-friendly structure is highly critical. So, this study focuses on the impacts of productive capacity shifts in key areas on ED in leading six developed economies by considering carbon dioxide (CO2) emissions as a dependent variable; using the productive capacity index (PCI) for human capital (PCI-HCA), transport (PCI-TRA), institutions (PCI-INS), energy-related public R&D investments, economic growth, nuclear energy, and renewable energy as independent variables; and applies a kernel-based regularized least squares (KRLS) method on data from 2000 to 2022. The results show that (i) PCI-HCA curbs CO2 emissions in all countries except the United Kingdom; (ii) PCI-TRA and PCI-INS are ineffective in declining CO2 emissions in all countries); (iii) R&D investments are helpful in all countries except Canada and Japan; (iv) economic growth structure is not eco-friendly in all countries; (v) nuclear (renewable) energy use is beneficial in Japan (all countries except Canada & France; (vi) KRLS method provides high estimation results similar to 99.2 %. Accordingly, the study discusses policy implications to prevent the ED by benefitting from productive capacity shifts, clean energy, and R&D investments in transforming economic structure.