The relationship between technology and emissions: Evidence from different income level countries and economic sectors

Each economic sector contributes differently to carbon emissions; hence the environmental impact of technological advancement may also differ across sectors; even more so, the same economic sectors might perform differently in different economic environments in countries. This study investigates the heterogeneous effect of aggregate and green technology on sectoral carbon emissions in a sample of 45 countries divided into three income categories (high-income, upper middle income, and lower middle income) between 1999 and 2018. The focus is on carbon emissions from five sectors (power, manufacturing, transport, petrol, and building). To do so, the two steps DIFF-GMM and the Feasible Generalised Least Square (FGLS) econometric methods are used. We proxied technological progress by four commonly used indicators (patents applications, R&D expenditure, ICT, and science and technology publications) and an aggregated one combining them. For the full sample analysis, results show that aggregate technology increases carbon emissions in all sectors except the building sector. Renewable energy significantly lowers emissions from all sectors, except the petrol sector. Aggregate technology is positively associated with carbon emissions across sectors in upper-middle-income and lower-middle-income countries, while negatively for the manufacturing and building sector in high-income countries.