A Renewed Approach to the Connection Between Economic Complexity and Environmental Degradation Considering the Energy Innovation Process in the Five Major European Economies

Jesus Cantero-Galiano ()
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Jesus Cantero-Galiano: Department of Applied Economics I, Faculty of Economics and Business Sciences, University of Castilla-La Mancha, 02071 Albacete, Spain

Sustainability, 2025, vol. 17, issue 7, 1-28

Abstract: This study examines the potential for long-term sustainable development in highly developed and sophisticated economies by analyzing the N-shaped environmental Kuznets curve in the relationship between the economic complexity index and the ecological footprint of the five largest European economies from 1994 to 2020. It also assesses the joint impact of R&D expenditure, renewable energy consumption, environmental taxation, and the moderating effect of the R&D effort-economic complexity index linkage on the economic complexity-ecological footprint nexus. Long-run estimation was conducted using Driscoll-Kraay standard error estimators. Subsequently, the panel-corrected standard errors robustness test was performed. The results confirm the existence of the N-shaped EKC in the economic complexity-ecological footprint relationship and reveal a significant inverse relationship between R&D expenditure, renewable energy consumption, and environmental taxation in their effect on the ecological footprint. The R&D expenditure dampening effect is also validated, indicating pathways toward long-term sustainability. Therefore, when considered together, enhancing renewable energy consumption, environmental taxes, and R&D expenditure can alleviate long-term ecological depletion in the highly developed and complex five largest European economies analyzed. These findings have essential economic and environmental policy implications.

Keywords: N-EKC; economic complexity; ecological footprint; R&D; environmental taxation (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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