Testing the load capacity curve hypothesis with green innovation, green tax, green energy, and technological diffusion: A novel approach to Kyoto protocol

Environmental degradation, which is seen as the most critical obstacle to sustainable development, is addressed by SDGs 7, 11, and 13. The Kyoto Protocol is the first international agreement to solve the problem of environmental degradation. The purpose of this research is to examine the role of Annex II nations in promoting environmental sustainability, particularly those that have adopted environmental obligations under the Kyoto Protocol. The study tests the load capacity curve hypothesis for Annex II countries during the 1994–2018 period. To begin with, we applied some priori tests to panel data analysis and utilized appropriate analysis methods based on the results. Unit root, cointegration, and long‐run estimators were employed. The findings confirmed a long‐run relationship for the load capacity curve model. In the end, two different estimators, namely cross‐sectional ARDL and augmented mean group estimator, were used to test the validity of the load capacity curve hypothesis. The study found that while the hypothesis did not hold true for all Annex II countries, it was only valid for Finland. This research suggests that Annex II countries are not adequately contributing to the achievement of the Kyoto Protocol targets.