Does cyclical innovation in environmental-related technologies make knowledge-based economies carbon neutral?

The knowledge-based economies have reacted by enacting stringent legislation and encouraging innovation in environmental-related technologies (IERTs) across organizations, such as academic institutions. Although previous research continues to support green innovation as a pro-cyclical concept, the irregular effect of IERT dynamics on COe in knowledge-based economies has not yet been studied. The paper looks at the cyclical nexus between IERT and COe in 37 knowledge-based economies using panel data from 1990 to 2019. The augmented mean group supported that an adverse change in IERT contributes to COe during economic downturns. Second, the findings confirmed that positive dynamics in IERT reduces COe during economic expansions. Third, the findings signified that trade openness, expansionary commercial policy, gross domestic product per capita, and expansionary monetary policy all increase COe, while contractionary commercial policy and use of renewable energy all decrease COe. Overall, the results of this study showed that there is a counter-cyclical association between IERT and COe. It is suggested that to reduce COe in knowledge-based economies, the government should support IERT in both economic contraction and expansion periods.