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This study aims to provide insight on the nexus between innovation, economic growth and CO2 emissions. In order to achieve this, data on potential factors such as innovation, environmental taxes, research and development (R&D) spending, electricity production, population size, high-technology exports and prices of photovoltaic systems are collected for the sample of the leading innovative countries over the period from 1990 to 2014. Based on a cointegrated panel methodology and a vector error correction model, the long-run, as well as the short-run dynamics of all possible combinations between the variables under study, are estimated. The results reveal that except for China, economic growth is mainly driven by electricity production, population size, CO2 emissions and R&D spending. However, innovation was found to have lesser effect on economic growth. In addition to that, the authors found evidence in favor of CO2 emissions being affected positively by population size and prices of photovoltaic systems and negatively by environmental taxes, high-technology exports, R&D spending and innovation. Moreover, on the contrary to population size, well-being is positively affected by CO2 emission and R&D spending.

Relationships between economic growth, CO2 emissions, and innovation for nations with the highest patent applications