Fuelling the low-carbon transportation sector in emerging economies: Role of institutional quality, environmental tax, green technology innovation and biofuel

Aligning with the United Nations SDGs, global efforts to enrich environmental quality can only be realized by decarbonizing carbon-intensive sectors, including transportation. Although emerging economies contribute substantially to the world economy, they struggle to achieve environmental sustainability with increasing industrialization, urban mobility, and transportation. Therefore, this study analyses whether the environmental tax (ET), green technology innovation (GTI), and biofuel use (BF) abate emissions from the transportation sector, considering 11 emerging economies from 2004 to 2022 using the dynamic fixed effect and CS-ARDL estimation techniques. The empirical analysis also discloses the imperative role of institutional quality (IQ) by integrating IQ's direct and moderation effects with GTI, BF, and ET. The empirical evidence highlights that while BF (−0.138), GTI (−0.074), and IQ (−1.303) ameliorate the decarbonization process, ET (−0.123) does not significantly decarbonize the transportation sector in the long-run. Furthermore, the results disclose an important role of IQ in moderating the emissions mitigation effectiveness of GTI (−0.174), BF (−0.129), and ET (−0.193) in emerging economies, indicating that benevolent institutional support is crucial for the sustainable transformation of the transportation sector in the long-run. Thus, this study suggests including policy mandates for generating second-generation biofuels, modernization of transportation infrastructure through green innovations, and strengthening institutional settings through a decentralized governance system to realize higher benefits and environmental goals.