Assessing the Impact of Green Environmental Policy Stringency on Eco-Innovation and Green Finance in Pakistan: A Quantile Autoregressive Distributed Lag (QARDL) Analysis for Sustainability

Agha Amad Nabi, Farhan Ahmed, Fayaz Hussain Tunio, Muhammad Hafeez and Daniela Haluza ()
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Agha Amad Nabi: Department of Business Administration, Government College University Hyderabad, Hyderabad 71000, Pakistan
Farhan Ahmed: Department of Economics and Management Sciences, NED University of Engineering & Technology, Karachi 75270, Pakistan
Fayaz Hussain Tunio: Department of Law, Shaheed Zulfiqar Ali Bhutto University of Law, Karachi 75600, Pakistan
Muhammad Hafeez: Institute of Business Management Sciences, University of Agriculture, Faisalabad 03802, Pakistan
Daniela Haluza: Department of Environmental Health, Center for Public Health, Medical University of Vienna, Kinderspitalgasse 15, 1090 Vienna, Austria

Sustainability, 2025, vol. 17, issue 3, 1-18

Abstract: Environmental policy stringency, eco-innovation, and green finance play key roles in advancing sustainability, particularly in low- and middle-income countries such as Pakistan. Using annual data from 1990 to 2020, this study employs a quantile autoregressive distributed lag (QARDL) approach to explore the effects across different quantiles. The results reveal a generally negative, quantile-specific relationship between eco-innovation and ecological footprints. At lower quantiles, a 1% increase in green finance is associated with a reduction in ecological footprints ranging from 1% to 4%, demonstrating a beneficial, albeit asymmetric, relationship. As the quantiles increase, the effect of green finance strengthens, with reductions in ecological footprints reaching up to 7% at higher quantiles. Furthermore, stringent environmental policies show a more pronounced impact at higher quantiles, where a 1% increase in policy stringency leads to a reduction in ecological footprints of 5% to 8%. These findings underscore the significance of robust environmental policies, eco-innovation, and green finance as effective mechanisms for reducing ecological impacts and promoting sustainability. This study provides valuable insights for policymakers to strategize on enhancing investments in green financing and implementing stringent environmental regulations, particularly targeting industries and sectors with substantial ecological impacts. Such measures can effectively mitigate environmental degradation by adopting eco-innovation and encouraging sustainable practices, especially in areas provoking acute ecological pressures.

Keywords: sustainability; sustainable development goals (SDGs); environmental policy; green financing; eco-innovation; ecological footprints (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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