AI-Driven Sustainability: How Innovation, Green Taxes, and Financial Access Shape the Nordic Region’s Environmental Capacity
Abstract
This study examines how artificial intelligence innovation, environmental tax, financial accessibility, and urbanization influence environmental sustainability in the Nordic region within the framework of the Load Capacity Curve hypothesis. The analysis uses annual data from 1990 to 2020 and begins with tests for cross sectional dependence and slope heterogeneity to capture structural characteristics across the selected economies. First generation and second generation unit root tests confirm that the variables are free from stationarity concerns, while panel cointegration results establish a stable long term association among them. The study then applies the Panel Autoregressive Distributed Lag approach to evaluate both short term and long term relationships between income, technological progress, fiscal factors, financial structures, and the load capacity factor. The findings validate the Load Capacity Curve hypothesis in the Nordic region by identifying a U shaped relationship between income and ecological capacity. Artificial intelligence innovation and environmental tax show positive contributions to environmental quality in both periods. In contrast, financial accessibility and urbanization exhibit negative effects on the load capacity factor. Evidence from the Dumitrescu and Hurlin causality test indicates one way causality running from income and artificial intelligence innovation toward the load capacity factor, while financial accessibility and urbanization demonstrate two way causal interactions. The study offers policy relevant insights for strengthening environmental sustainability in advanced economies.
Keywords:
Artificial intelligence, Environmental tax, Financial accessibility, Load capacity factor, Nordic regionReferences
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