On the pathway to net-zero in EU’s top eco-innovation performers: the effectiveness of energy transition policies

This study explores the impact of eco-innovation performance, green energy transition, energy transition, economic growth, and natural resources depletion on ecological footprint in a specific group of countries, the ‘eco-innovation leaders’, recently identified by the EU for their eco-innovation performances. Due to structural breaks and cross-sectional dependence, the study benefits from novel Fourier-PEGLS and Fourier-CS-ARDL methods with an extended period of 1990–2022. The empirical findings confirm long-run cointegrated relationships among eco-innovations, ENEF, the green energy transition, economic growth, and natural resource depletion in the eco-innovation leaders. The novel Fourier-CS-ARDL and Fourier-PEGLS models further indicate that eco-innovations, energy efficiency, and the green energy transition significantly reduce ecological footprint and, hence, environmental degradation. Convergence to the long-run equilibrium takes approximately 2.7 years, with 37.09% of the deviations from the long-run equilibrium corrected each year. The country-specific duration of convergence ranges from 1.78 to 9.9 years, with Finland experiencing the shortest convergence period and Denmark having the longest. Moreover, with robust methods, the study identifies bidirectional and unidirectional Granger causality between eco-innovation, ENEF, economic growth, natural resources depletion, and green energy transition with feedback effects for a large set of tested directions of causality, which have profound impacts. These findings provide a comprehensive analysis of how eco-innovation, green energy transition, and ENEF contribute to reversing environmental degradation, with implications for achieving carbon neutrality targets in the EU.