Assessing sustainability indicators of carbon emissions in the Netherlands: The roles of innovation, renewable energy, and economic openness

This paper examines the long- and short-run relationships between innovation (INNO), carbon dioxide emissions (CO2), real economic activity (GDP), foreign direct investment (FDI), trade openness (TRAD), and renewable energy (RE) in the Netherlands over 1990–2023 using the autoregressive distributed lag (ARDL) bounds testing framework. We specify a log-linear emissions model and, as a robustness check, an INNO-driven model to study feedback effects. The empirical strategy includes unit-root testing (ADF/PP/KPSS), structural break screening, ARDL bounds cointegration tests, long-run estimation with an error-correction representation, and extensive diagnostics (serial correlation, heteroskedasticity, and functional form) as well as stability tests (CUSUM/CUSUMSQ). While INNO, RE penetration, and trade structure are conceptually expected to reduce emissions through efficiency and substitution channels, scale effects from GDP and FDI can increase emissions unless accompanied by sufficiently strong technological upgrading. The study contributes country-specific evidence for the Netherlands, a small open economy with advanced INNO capacity and ambitious climate targets. Results sections include carefully formatted tables and figures templates ready for estimation. Rather than identifying generic emissions drivers, this study evaluates the effectiveness and stability of innovation-led decarbonization under intensified post-2020 climate policy regimes in the Netherlands.