Green Innovation and Fiscal Spending: Decoding the Path to Sustainable Development

ABSTRACT This study investigates the impact of environmental and economic factors on carbon emissions (CAR) in China from 2007 to 2020, considering the Environmental Kuznets Curve (EKC) hypothesis. We employ the MM‐QR approach to analyze asymmetric relationships between Green Total Factor Productivity (GTFP), Fiscal Expenditure Technology (FTE), Green Technology Innovation (GTI), Innovation Level (INN), Gross Domestic Product (GDP), Human Capital (HC), and carbon emissions (CAR). Findings reveal that GTFP, FTE, GTI, and INN exert significant negative impacts on cCAR, with these effects strengthening at higher quantiles. This suggests that advancements in green technology and fiscal policies promoting environmental technologies contribute to reduced carbon emissions. Conversely, GDP exhibits a positive association with CAR, potentially reflecting the initial stages of the EKC. GDP 2 is also positively associated, indicating a potential turning point towards environmental degradation at higher income levels. Based on these results, the study proposes policy recommendations to enhance ecological well‐being and achieve net‐zero emissions. These include fostering human capital development for skilled labor in green sectors, promoting the development and adoption of green technologies, and increasing fiscal expenditure on environmental research and development (R&D). This research contributes to the field of environmental management by providing empirical evidence on the effectiveness of green economic policies and technological advancements in reducing carbon emissions. The findings offer valuable insights for policymakers aiming to achieve sustainable development in China and similar economies.