From Policy to Practice: How Eco‐Innovation, Green Finance, and Environmental Taxes Drive Carbon Neutrality and Sustainable Development

ABSTRACT Persistent concerns regarding ecological balance, economic progress, and long‐term sustainability pose significant challenges for global economies. Nations are confronting resource scarcity and the escalating effects of climate change, which have intensified the debate on the costs and benefits of eco‐innovation and green financial policies. This study investigates the impact of eco‐innovations, environmental taxes, green financial policies, natural resource exploitation, and renewable energy adoption on greenhouse gas (GHG) emissions, carbon emissions, and the ecological footprint in OECD economies. An advanced econometric approach, the Cross‐Sectional Augmented Autoregressive Distributed Lag (CS‐ARDL) model, is employed to examine these relationships in both the short and long run. The findings indicate that environmental technologies, represented by eco‐innovation and process eco‐innovation, exhibit a statistically significant negative association with the ecological footprint, carbon emissions, and GHG emissions. Furthermore, environmental taxes and renewable energy consumption are found to mitigate ecological degradation. Conversely, economic growth and natural resource dependence exacerbate environmental challenges. Finally, a causality analysis reveals a bidirectional causal relationship between GDP and natural resources, while a unidirectional causality runs from GDP to eco‐innovation, renewable energy, and environmental taxation. Based on these results, the study concludes with policy implications aimed at achieving net‐zero emissions and promoting sustainable development.