How does climate policy uncertainty determine green innovation adoption? New perspectives from the BRICS

Samar S. Alharbi, Mosab I. Tabash, Umar Farooq and Suzan Sameer Issa

The Journal of Economic Asymmetries, 2025, vol. 31, issue C

Abstract: The lack of information on climate policies designed by the government may lead to disruptive policies (specifically policies related to environmental sustainability) by the other sectors. The primary objective of the current study is to examine how climate policy uncertainty (CPU) affects the adoption of sustainable green innovations. The effects of CPU on environmental technology development (EDT) and environmental patent registration (EPR) in the BRICS economies between 2000 and 2022 are the focus of this study. This study investigates the relationship between CPU and green innovation using a rigorous methodological approach utilizing the FMOLS and CS-ARDL models. To account for the various factors influencing green innovation, the analysis includes a range of financial and economic indicators, including real interest rates (RIR), GDP FDI inflow, and financial development (FD). The results show that CPU has a significant negative impact on both EDT and EPR, indicating that the development and registration of environmental technologies are hampered by higher policy uncertainty. In contrast, positive effects on GDP FD and FDI encourage the development and adoption of green innovations. A further finding of the study is that investments in green technology are negatively impacted by RIRs' higher borrowing costs. The ramifications of these findings underscore the need for legislators to guarantee predictability and stability in regulations to promote green innovation. By creating a more uniform set of regulations, governments can encourage investment in and progress in environmental technologies. The research's novelty is found as it expands the existing literature exploring the impact of other types of uncertainties on green innovation, while the current analysis focuses on CPU-green innovation adoption nexus.

Keywords: Climate policy uncertainty; Green innovation; Environmental development; Environmental patents; Asymmetric environmental sustainability (search for similar items in EconPapers)
JEL-codes: O33 Q55 Q58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:31:y:2025:i:c:s1703494925000118

DOI: 10.1016/j.jeca.2025.e00411

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