The effect of technological progress and income per capita on carbon dioxide emission: the moderating role of economic freedom

Climate change in context of environmental issues is pushing most of the countries to set the goals in order to achieve carbon neutrality and sustainable development. The recognition of Sustainable Development Goal (SDG) thirteen (13) is aided by the objective of this study which is to take an urgent action to combat climate change. In this context, this study investigates the effect of technological progress, income, and foreign direct investment on carbon dioxide emission by taking into consideration the moderating effect of economic freedom in 165 global countries from 2000 to 2020. The study employed ordinary least squares (OLS), fixed effects (FE), and two-step system generalized method of moments for analysis. The findings reveal that economic freedom, income per capita, foreign direct investment, and industry increase carbon dioxide emission while technological progress reduces emission in global countries. Surprisingly, economic freedom indirectly increases the level of carbon emissions by technological progress; however, economic freedom indirectly decreases the level of carbon emissions by income per capita. In this regard, this study favors clean eco-friendly technologies and seeks methods for development without harming the environment. Furthermore, the findings of this study have considerable policy suggestions for the sample countries.