Green technology and stringent environmental policy interactions in a spatial context: Assessing domestic and cross-border CO2 emission reductions in border sharing OECD economies.

Amidst escalating climate challenges, understanding how technological innovation and policy instruments jointly shape carbon outcomes is critical, particularly in spatially connected regions. While existing research has explored the independent impacts of green technologies (GTECH) and environmental policy stringency (EPS) on CO2 emissions, limited attention has been paid to their interactions and their spatial transmission. This study fills this gap by making a threefold contribution. First, it evaluates the individual and combined effects of GTECH and EPS on CO2 emissions in the home country. Second, it investigates the moderating role of EPS in the GTECH-emissions relationship and provides insights into how policies enhance the effectiveness of green technology. Third, it incorporates a spatial dimension to assess how GTECH and EPS influence emissions in neighboring countries and whether EPS moderates these effects. The analysis uses annual panel data from 16 border-sharing OECD economies from 1995 to 2020. This study applies the Spatial Durbin Model (SDM) with effect decomposition to capture both direct and indirect spatial impacts. The results show that both GTECH and EPS independently reduce CO2 emissions within the home country, and their combined impact is significantly enhanced when EPS moderates the relationship between GTECH and emissions reduction. More importantly, this study reveals substantial spatial spillover effects. Our results reveal that the adoption of GTECH and the implementation of stringent policies not only reduce emissions in the home country but also have a pronounced impact on neighboring economies. This finding highlights the broader transboundary effects of green technology and stringent policies.