Green innovation, globalization, financial development, and CO2 emissions: the role of governance as a moderator in South Asian countries

The current study is designed to analyze the relationship between, environmental innovations, globalization, financial development, and CO2 emissions in the South Asian region over the period of 1996 to 2019. In this regard, the role of governance is also incorporated as a moderator along with Environmental Kuznets Curve (EKC) hypothesis. The sample size includes Bangladesh, India, Pakistan, Nepal, and Sri Lanka. The results of the robust least square show the validity of EKC in the sample countries. Environmental innovations show desirable results on CO2 emissions, while globalization, financial development, and governance are increasing environmental degradation. The role of governance as a moderator is only effective and favorable with environmental innovation. However, in the case of globalization and financial development, governance appeared to be ineffective in lessening the rate of emissions; rather, it contributes to emissions. It clearly shows the missing link in formulating coherent policy to achieve sustainability targets. Therefore, it is desirable to improve the role of governance with respect to environmental policies not only to handle directly environmental issues but also indirectly while promoting the process of globalization and financial development.


Introduction
One of the biggest problems facing the modern world has been environmental degradation. Due to its connection to billions of human lives, the topic of environmental deterioration has drawn a great deal of attention from academics and researchers (Destek and Sarkodie 2019). According to a widely held view, the unchecked increase in pollution emissions poses a major risk to environmental sustainability, particularly given the focus on promoting a green economy in the context of the Sustainable Development Goals (Asongu et al. 2017;Efobi et al. 2019). It is a well-established fact that greenhouse gases contribute to global warming (Atasoy 2017). Since 1880, the temperature of the Earth has been elevated by 1.4 °F as a result of greenhouse gas emissions, posing grave threats to life (NASA 2020). Despite various factors contributing to this decline, the most significant cause is CO 2 emissions. Seventy-five percent of the world's emissions of greenhouse gases come from carbon dioxide (CO 2 ). Global climate change and extreme weather including floods, droughts, heatwaves, and hefty rainfall are becoming more common in recent history. Such weather conditions are emerging due to CO 2 emissions. The lives of people and ecosystems are significantly being impacted by these severe catastrophes (Diffenbaugh 2020).
Therefore, for many developing nations, controlling environmental deterioration and keeping sustainable development goals up is among the biggest challenges. The trade-off between environmental pollution and economic growth is the main obstacle to simultaneously achieving the two goals. The Environmental Kuznets Curve, which asserts that pollution and per capita income have an inverse U relation, is the main focus of the traditional examination of the relationship between economic growth and environmental contamination (Grossman and Krueger 1991). The adoption of pollution prevention measures is thought to be difficult in the early phases of development because of high discount rates.
As the economy expands and the discount rate declines, it becomes viable to put pollution control actions into place (Di Vita 2008).
Many countries have experienced economic growth that is primarily driven by globalization and financial development. A collection of economic, political, and cultural phenomena collectively known as "globalization" results in growing interdependence between countries (Mills 2009). Such integration inevitably increases human needs but also carries the risk of leaving behind unsustainable environmental footprints (Hoekstra and Wiedmann 2014). The creation of effective strategies for environmental sustainability is extremely difficult while analyzing such contradictory results. Studies looking at how globalization affects environmental quality come up with conflicting results. According to several studies, globalization improves environmental quality (Antweiler et al. 2001;Shahbaz et al. 2016). Additionally, few research studies indicate that globalization degrades environmental quality, supporting the pollution haven theory (Fell and Maniloff 2018;Silva and Zhu 2009). To better understand how globalization is affecting the environment, these counterfactuals urge additional research.
On the other hand, financial development essentially indicates a route of lowering the expenses of gathering information, upholding treaties, and conducting dealings (Levine 2005), whereas a strong financial system encourages foreign direct investment and boosts development. Therefore, the consequences of financial development on environmental quality are unclear (Ang 2008), while some research groups show that financial development enhances environmental quality by lowering carbon emissions (Jahanger 2022;Kamal et al. 2021;Khalid et al. 2021;Ramzan et al. 2022;Usman et al. 2022). According to certain studies, environmental quality is deteriorated by the financial development (Abbasi and Riaz 2016;Abid 2017;Boutabba 2014;Kayani et al. 2020). The aforementioned arguments were, however, refuted by investigations done by Dogan and Seker (2016) and Ozturk and Acaravci (2013). They argued that financial development has no influence on maintaining or endangering environmental sustainability objectives.
In order to attain sustainability in development and the environment, numerous studies emphasized the need for technological innovation (Cecchin et al. 2020;Geissdoerfer et al. 2017;Schot and Steinmueller 2018). Green innovation lowers pollutant levels (Albort-Morant et al. 2017;Castellacci and Lie 2017) and improves environmental performance (Roy and Khastagir 2016). Innovations provide solutions to human needs, promote economic development, and advance social welfare (Ayres and Warr 2010). Meanwhile, an increasing concern has been raised due to technological developments that can create an almost unending series of problems followed by their solutions (Bostrom 2020). The majority of earlier research demonstrates that greater technical innovation reduces CO 2 emissions. Through beneficial spillover effects and the more effective use of resources (Bakhsh et al. 2021;Chen and Lee 2020), technological innovation can improve environmental quality (Omri and Hadj 2020). Green technology innovation is more in line with the goal of sustainable development and parallels technical innovation has a generous impact on efficiency and ignores environmental externalities (Schot and Steinmueller 2018). Therefore, an effective way to reduce environmental issues is through environment-related innovations (Guo et al. 2021).
On the other hand, governments around the world are still looking for ways to encourage sustainable development, which motivated policymakers and researchers to finally start by emphasizing the importance of good governance as a crucial tool for accomplishing this aim (Bos and Gupta 2019). Only a handful of environmental economists have examined how governance plays a significant part in environmental pollution, although governance affects both economic growth and environmental pollution (Danish and Ulucak 2020), while in the case of environmental risk, the effectiveness of the governmental structure and its institutions has a direct and indirect impact on environmental quality. In addition to lowering the level of pollution, good governance also improves the environment and regulates emission levels (Clapp and Dauvergne 2011;Jorgenson 2009;Leonard 2006).
There are numerous ways that effective governance can reduce environmental dangers (Bosselmann et al. 2008;Samimi et al. 2012). Effective governance can play a critical role in reducing environmental dangers by implementing policies and regulations that promote sustainable development, balancing economic growth with environmental protection, and fostering eco-innovation. As a moderator of financial development, governance can ensure that economic policies and investment decisions consider the long-term environmental consequences. As a moderator of globalization, governance can work to harmonize international environmental standards and promote cooperation on environmental issues. By promoting eco-innovation, governance can help drive the development and adoption of new technologies and practices that have a lower environmental impact. Ultimately, effective governance is key to achieving sustainable development and mitigating the negative impacts of human activities on the environment. According to stakeholder theory, adopting sound governance procedures may show to the market that businesses care about safeguarding the interests of various stakeholders (Cormier and Magnan 2003). This may have an impact on the relationship between environmental innovation and carbon emissions. According to Albitar et al. (2022), improved environmental governance and environmental innovation together result in lowering CO 2 emissions. According to Afrifa et al. (2020), good governance may be able to control the association between innovation input and CO 2 emissions. The likely weak influence of financial development on both informal and formal entrepreneurship is greatly strengthened, according to Omri et al. (2021), by effective governance. Overall, the majority of researchers neglected the interaction between financial development and effective governance to enhance environmental quality.
Around 5.2 million km 2 , or 11.71% of the Asian continent and 3.5% of the planet's land area, is occupied by South Asia. 1 South Asia is among the most crowded regions in the world, with 1.891 billion people, or roughly one-fourth of the world's population, living there. 2 It is home to a diverse population that makes up about 24% of the world's population and around 39.49% of Asia's population. The World Bank estimates that South Asia is responsible for over 8% of global carbon emissions more than 9% of global greenhouse gas emissions. These nations overuse their natural resources for the same reasons, which further lowers the quality of their environment. These nations' economies have advanced greatly over the past few years. These nations also have lax environmental rules. So, a lack of regulations has forced the industry to rely on conventional energy sources. The lower legitimacy of governmental institutions is a significant contributor to environmental damage.
To the best of our understanding, there has not yet been a comprehensive examination of the potential moderating effect of governance on the relationship between globalization and CO 2 emissions. While some studies have investigated the influence of governance on the finance-CO 2 nexus, none have explored its role in the broader context of environmental innovation and globalization. Additionally, there appears to be a lack of research on this topic specifically in the context of South Asian countries. This study seeks to fill this gap by examining the impact of governance on CO 2 emissions through the lens of environmental innovation, globalization, and financial development, offering a unique contribution to the existing literature.
In our study, first, we will try to answer the question of whether the EKC holds for the panel of South Asian countries or whether other factors such as governance, financial development, green innovation, and globalization have an impact on the environmental quality of South Asian nations. Second, we will assess the possibility that enhanced governance, serving as a moderator, can either amplify the positive impact of financial development on the environment or alleviate its adverse effects on environmental quality. Third, we will examine whether improved governance can serve as a moderator for environmental innovation, potentially enhancing its ability to reduce CO 2 emissions. Fourth, we will examine if effective governance lessens the detrimental effects of globalization on environmental quality.
There are not many studies available that consider how governance and globalization, financial innovation, and environmental innovation all work together to reduce CO 2 emissions in South Asian nations. By combining the interaction term of governance efficacy with globalization, financial development, and environmental innovation in South Asian countries, the current study aims to overcome the literature gap.
This study, therefore, presents a unique contribution to the field by exploring the role of governance on CO 2 emissions through the lens of environmental innovation, globalization, and financial development. The results of the study have the potential to deepen our understanding of the complex and multi-faceted impact of governance on CO 2 emissions and provide valuable insights for policy-makers and stakeholders seeking to address this critical global challenge.
The remainder of the essay is divided into the following groups. A review of the literature is presented in "Literature review". The theoretical framework are discussed in "Theoretical framework". The methodology is found in "Models and methodology". Data and variables are presented in Data and variables. The findings and discussion are presented in "Result and discussion". Conclusion and policy recommendations are included in "Conclusion and policy implication".

Literature review
The literature review is divided into five sections in order to examine the impact of environmental innovation, globalization, financial development, and governance on CO 2 emissions. Moreover, existing literature on the issue of governance as a moderator is also presented.

Nexus between environmental innovation and CO 2
By introducing green technology and patents, green innovation works to preserve the environment. So, it is an effective way to reduce environmental issues through innovation relating to the environment (Guo et al. 2021). The impact of environmental innovation on China's carbon emissions from 2000 to 2013 is estimated by Zhang et al. (2017). Their data demonstrate how well the majority of China's environmental innovation policies reduce carbon emissions. From 1990 Q1 to 2016 Q4, Xin et al. (2021) examined the cyclical effects of innovation in environmental-related technology on CO 2 emissions in the USA.
According to their research, positive shocks in environmental technology innovation during the expansion period result in a reduction in CO 2 emissions. Additionally, during the recession phase, negative shocks to innovation in environmentally friendly technology led to an increase in CO 2 emissions.
The number of patents has a constructive and large impact on the carbon emissions of OECD nations, as demonstrated by Ganda (2019). Danish and Ulucak (2020) investigated how environmental technologies could help the BRICS countries to achieve green growth. Their findings demonstrate that environmental-related technologies positively contribute to green growth. They made the case that innovations needed to be improved to meet sustainability and green growth goals. According to Mensah et al. (2018), innovation is crucial to lowering CO 2 emissions in the majority of OECD nations. According to Hashmi and Alam, (2019), a 1% surge in ecologically favorable patents results in a 0.017% decrease in carbon emissions. Similarly to this, Fethi and Rahuma (2019) looked into how eco innovation affected carbon dioxide emissions for the top 20 exporters of refined oil from 2007 to 2016. They discover that eco innovation has a favorable impact on CO 2 emissions. Mongo et al. (2021) examined the effects of environmental innovations on CO 2 emissions for 15 European nations over 23 years by employing an autoregressive distributed-lag model. Their findings show that environmental innovations typically lessen CO 2 emissions over the long term; however, the observed effect is reversed during the short term, pointing to the possibility of a rebound effect. W. Li et al. (2021a) revealed the same rebound effect for 32 economic industries in 32 Chinese provinces. X. Li et al. (2021b) further revealed that innovative technologies tend to be "dirty" at a minimal level of innovation but "green" at great levels of innovation. By utilizing the number of environmental patent claims as a surrogate for environmental innovation, Toebelmann and Wendler (2020) examine how environmental innovation affects the carbon dioxide emissions of EU-27 nations. Their results demonstrate how environmental innovation helps cut carbon dioxide emissions. Using panel data from Chinese cities from 2006 to 2017, Lin and Ma (2022) studied the effect of green technology developments on CO 2 emissions. According to their findings, the influence of new green technologies varies depending on the type of city. However, the impact is not very noticeable in China cities earlier in 2010; green technological breakthroughs helped to reduce CO 2 emissions after 2010. Countries and companies worldwide have been drawn to the idea of "green innovation," which emerged as a potential option to protect the environment while achieving financial objectives (Fliaster and Kolloch 2017).

Nexus between globalization and CO 2 emission
Empirical research looking at how globalization affects environmental quality comes up with conflicting results. One collection of studies demonstrates how globalization benefits the environment. This study by Khan et al (2022) analyzes the relationship between globalization, energy consumption, and economic growth in selected South Asian countries using annual time series data from 1972 to 2017 collected from the World Development Indicator (WDI). The results, obtained through a fully modified ordinary least square (FMOLS) method, show that globalization and non-renewable energy consumption have a significant and positive impact on CO 2 emissions in the South Asian region, negatively affecting the environment. The results also support the Environmental Kuznets Curve (EKC) hypothesis, showing a bidirectional causality between economic growth (GDP) and energy use, with GDP growth having a positive effect and energy use having a negative effect on economic growth. Lv and Xu (2018) scrutinized the connection between economic globalization and CO 2 emissions for fifteen developing nations between 1970 and 2012. They discovered that CO 2 emissions are negatively impacted by economic globalization. According to the estimations, a rise of 1% reduces CO 2 emissions by 0.1%. For 17 MENA nations between 1971 and 2015, Awan et al. (2022b) proved that globalization has a carbon-reducing effect. The same conclusion is drawn by Tahir et al. (2021) for South Asian economies, Zafar et al. (2021) for Asian economies, X. Li et al. (2021b) analysis of One Belt and Road Initiative economies, Aluko et al. (2021) for 27 industrialized economies. According to their findings, the selected economies' environmental quality has improved as a result of globalization. In a recent study, Farooq et al. (2022) examined a sizable panel data set made up of 180 nations between 1980 and 2016. They demonstrated via panel quantile regression that globalization improves environmental degradation in those economies that have existing low levels of carbon emissions.
Additionally, some research indicates that globalization degrades environmental quality, supporting the pollution haven theory (Cole 2006;Fell and Maniloff 2018;Silva and Zhu 2009). Solarin et al. (2017) analyzed the Trans-Pacific Partnership (TPP) agreement and looked at its effects on environmental quality using data from Malaysia for the years 1970 to 2014. They found that globalization increases the rate of CO 2 emissions using the ARDL and FMOLS techniques. For the 1985-2013 timeframe, You and Lv (2018) tested this nexus using data from 83 different nations. They claimed that there are spillover effects from carbon emissions on nearby nations. Their geographical regression analysis's findings suggested that economic globalization had a deleterious effect on CO 2 emissions. The same conclusion is revealed by Zaidi et al. (2019) for Asia pacific economic cooperation countries, Rafindadi and Usman (2019) for South Africa, Chien et al. (2021) by utilizing the quantile autoregressive distributed lag on time series data of Pakistan from 1980 to 2018, Sethi et al. (2020) for India, Umar et al. (2020) for China. Jahanger (2022), using the GMM estimator, found that environmental degradation is positively correlated with globalization for a sample of 78 emerging economies between 1990 and 2016. Khan et al. (2022) used data from South Asian nations from 1972 to 2017 to demonstrate how the globalization index has a strong positive impact on CO 2 levels and environmental destruction.
A sizable corpus of research findings, however, is still unclear, suggesting that there may or may not be a connection between CO 2 emissions and globalization. Haseeb et al. (2018) examined the relationships between globalization and CO 2 emissions for BRICS economies by employing the Dynamic Seemingly Unrelated Regression technique encompassing the period from 1995 to 2014. They stated that there is no correlation between globalization and CO 2 emissions for the panel of BRICS countries, whereas, time series data revealed that globalization greatly increases CO 2 emissions in India and Russia while considerably lowering them for the rest of the selected countries. Using the augmented mean group (AMG) estimators, Shahbaz et al. (2018) also examined the relationship between globalization and emissions for 25 developed nations. Akadiri et al. (2019) employed the ARDL method to look into the effects of globalization on CO 2 emissions in Turkey. They revealed that there is no discernible influence of globalization on environmental quality. The same conclusion is drawn by Salahuddin et al. (2018) who looked at nations in Sub-Saharan Africa.
Destek (2020) used the EKC framework for nations in Central and Eastern Europe from 1995 to 2015 to examine the effects of various globalization trends on carbon emissions. The findings imply that while political globalization reduces emissions in the chosen nations, economic and social globalization raises emissions. Lv and Xu (2018) claimed that while trade flows boost environmental quality in high-income economies, they can have the opposite effect in low-and middle-income nations. According to Adebayo et al. (2022), globalization is a strong predictor of environmental change; however, it reduces CO 2 emissions in the USA, the UK, Canada, Germany, and France while having a positive impact in Japan and Italy. Using data from 1971 to 2016 and the ARDL technique, Xu et al. (2018) examined the impact of globalization (covering all of its dimensions) on carbon emissions in Saudi Arabia. Their findings divulged that whereas other aspects of globalization do not affect CO 2 emissions, economic globalization does.

Nexus between financial development and CO 2
A large body of literature examines the connections between financial development and carbon reduction initiatives. Financial development has been linked to both direct and indirect effects on carbon emissions, according to several researchers, including Gokmenoglu and Sadeghieh (2019), Jun et al. (2018), Kayani et al. (2020), and Wang et al. (2019). Khan and Ozturk (2021) examined both the direct and indirect impacts of financial development on environmental damage. Their research uses a large sample of 88 emerging nations from the years 2000 to 2014 using a system generalized method of moments. Based on five different financial development indices, the estimated results support financial development's involvement in reducing pollution for the chosen countries. Previous research has demonstrated that financial development promotes growth and inevitably reduces energy needs (Gunasekaran et al. 2014). Additionally, some studies have discussions about the connections between the finance system, energy use, and environmental quality. The use of energy-efficient equipment is one way that financial development reduces carbon emissions, according to this viewpoint (Charfeddine and Kahia 2019;Shahzad et al. 2017;Tamazian and Rao 2010). According to some research, financial development slowed down environmental damage (Khalid et al. 2021;Mehmood et al. 2022;Sethi et al. 2020;W. Wang et al. 2020b;Zaidi et al. 2019). Furthermore, Sethi et al. (2020) used the vector error correction model (VECM) Granger causality test to investigate the relationship between financial development and carbon emissions in India from 1980 to 2015. They concluded that financial development negatively affects those emissions through economic growth channels. From 1990 to 2017, R. Wang et al. (2020a) examined the trends in carbon emissions for the N-11 countries. Their research showed a link between financial advancement and carbon emissions that was favorable. A significant number of studies have also found that pollution rose as a result of financial development.
According to the second school of thought, financial progress increases CO 2 emissions as follows (Ito 2017). First, businesses that are publicly traded can obtain low-interest financing and use it to fund initiatives like the purchase of machinery or investments in initiatives that would ultimately result in a rise in carbon emissions (Kayani et al. 2020). Second, economies with strong financial systems can entice foreign direct investment, which unfortunately increases CO 2 emissions.
Lastly, the process of financial intermediation has expanded. Loans are easily accessible to consumers for the purchase of high carbon emissions products such as air conditioners, refrigerators, washing machines, and cars (Cai et al. 2019). Therefore, financial development is considered some of the most crucial indicators to increase pollution levels. Tahir et al. (2021) for South Asian economies, Kamal et al. (2021) for developing nations, and Ramzan et al. (2022) for Pakistan are a few instances. Abid et al. (2021) evaluated how financial development affected the sustainability of the environment. They demonstrated that there was a strong connection between financial development and environmental sustainability. They emphasized the significance of financial development in tackling environmental issues in advanced economies. According to Sethi et al. (2020), the development of the banking industry through the economic growth channel has a detrimental effect on environmental sustainability.
The empirical basis for both of these conflicting theories on the relationship between financial development and the environment is quite limited, although both theories are supported by the current research, while the findings of Umar et al. (2020) indicate that financial development has little to no impact on CO 2 emissions. Keep in mind that research on the relationship between financial development and the environment is still in its infancy, and more empirical evidence is needed to grasp both the direct and indirect ways that financial development may affect environmental standards.

Nexus between governance and CO 2
Economic security, a better business climate, and profitable investment prospects are all considered to be aspects of good governance. Generally speaking, it is ensured by the rule of law, good regulations, effective government, political stability, and the international standing of each country (Daryaei et al. 2012). The effect of good governance on environmental quality has been researched by certain academics. For instance, the study by Andlib and Salcedo-Castro (2021) examined the relationship between tourism, governance, and CO 2 emissions in selected South Asian countries using FMOLS, DOLS, and FEOLS methods from 1995 to 2019. The results show that effective governance is negatively associated with CO 2 emissions, indicating that CO 2 emissions can be reduced with effective government policies. Using autoregressive distributed lag models, Simionescu et al. (2022) evaluated the effect of global governance indicators on greenhouse gas emissions in Romania between 1996 and 2019. The findings show that while political stability, regulatory quality, and corruption control lowered pollution over time, voice and accountability increased greenhouse gas emissions. Gani (2012) examined the impact of various governance factors on CO 2 emissions for a large number of developing nations, including Brazil, and discovered that sustaining a stable political climate, bolstering the rule of law, and combating corruption were notably crucial components. For a sample of 73 nations, Mavragani et al. (2016) showed that government indicators had a favorable effect on environmental quality. By using panel quantile and Granger causality approaches, Bildirici (2022) investigated the effects of governance on environmental pollution over the years 1996-2018. Sub-Saharan Africa and the Middle East nations were chosen by taking into account the EPI (2020) index and the governance index (2020). According to the findings of their investigation, governance has a favorable impact on carbon emissions. For a panel of 13 Muslim nations between the years 2002 and 2014, Muhammad et al. (2021) conducted an empirical analysis of the relationships between tourism, governance, and FDI on CO 2 emission and energy use and demonstrated that governance has a detrimental impact on CO 2 emissions. From 1996 to 2017, Baloch and Wang (2019) examined the governance practices in the BRICS nations regarding CO 2 emissions. They discovered a considerable and detrimental effect of governance on CO 2 emissions, which may be linked to the government's stance on the creation and application of sensible and efficient laws and other measures to prevent environmental deterioration. According to Ronaghi et al. (2020), governance is a factor that can lower emissions in OPEC countries over 8 years (2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015). Between 1996 and 2016, Saudi Arabia's carbon emissions grew due to good governance (Omri et al. 2021). According to Jamil et al. (2021), from 1996 to 2014, 49 Belt and Road Initiative (BRI) countries were able to reduce their CO 2 emissions because of good governance. In high-income nations, better governance results in higher environmental quality, whereas in middle and lowincome nations, it results in lower environmental quality (Gök and Sodhi 2021). Spending on environmental protection decreases air pollution as governance metrics improve. This applies to the MENA nations between 1996 and 2015 (Gholipour and Farzanegan 2018).
There is a connection between good governance and environmental sustainability in the area of providing an effective legislative framework and institutions for the implementation of environmental sustainability strategies, according to Ikuru and Orlu (2022) analysis based on opinions of 313 respondents. They suggested that to create a sustainable environment, the government should jointly create and carry out national regulations and strategies for pollution remediation.

Governance as moderator
The potential of strong governance to moderate the adverse impact of financial development on environmental quality in Saudi Arabia from 1996 to 2016 was explored by Omri et al. (2021). The study used different indicators to measure financial development and governance quality, and applied the Dynamic Ordinary Least Squares (DOLS) estimator.
The results showed that financial development generally increases carbon emissions, while good governance has mixed effects. However, when good governance and financial development occur together, they reduce carbon emissions.
The same results are shown by Wen et al. (2022), that carbon emissions can be reduced when financial development is supported by sound governance. The likely poor influence of financial development on both informal and formal entrepreneurship is greatly enhanced by excellent governance, according to a study by Omri (2020) that looked at 19 chosen rising economies over the period of 2001-2014. The moderating impact of governance quality on the financeenvironment relationship is also supported by Kassi et al. (2022) for 123 chosen countries between 1990 and 2017. According to their research, effective governance reduces the marginally positive influence of financial development on CO 2 emissions. Muhammad et al. (2021) supported the necessity to improve effective governance to enhance environmental quality. Al-ahdal et al. (2020) demonstrated in a panel data analysis of 53 Indian and 53 Gulf Cooperation Council companies from 1996 to 2016 that good governance practices had a significant and favorable impact on firms' financial performance. The implementation of strong governance practices also considerably and favorably affects the financial performances of industrial enterprises (Braune et al. 2020). Albitar et al. (2022) looked at how environmental innovation affects CO 2 emissions as well as how environmental governance affects this relationship in a moderating way. According to their research, which was grounded on a sample of firms that were registered on the London Stock Exchange between 2016 and 2020, environmental innovation lowers CO 2 emissions. Additionally, their findings point to the controlling impact of environmental governance on the relationship between environmental innovation and CO 2 emissions. They assert that a decrease in CO 2 emissions results from environmental innovation and greater environmental governance. For 49 BRI countries, Jamil et al. (2021) employed the generalized method of moments, and the data covered the years 1996 to 2014. Their findings imply that, despite the presence of substantial wealth inequality, governance was able to reduce CO 2 emissions in BRI countries over long and short periods. However, the CO 2 emissions rise when there is an interaction of government-technological innovation as well as an interaction of government-technological innovation and Gini. Furthermore, according to the resource-based view, a high level of adherence to stakeholders' perceptions through the adoption of good governance and environmental standards may help companies gain a competitive edge by offering more impactful innovation. This may have a favorable moderating effect on the relationship between environmental innovation and carbon emission reduction (Zhang et al. 2017). In essence, businesses are having trouble cultivating strong environmental innovation skills due to mounting environmental pressures from the government and the market (Cheng et al. 2014;Lee and Min 2015). In this concern, Afrifa et al. (2020) used data from 29 rising nations and 725 country-year observations to evaluate whether innovation input affects CO 2 emissions and how country governance characteristics can modulate this link. The findings suggest that there is a negative relationship between innovation investment and CO 2 emissions, meaning that countries that invest in innovation are better equipped to combat climate change by reducing CO 2 emissions. By dividing the sample into countries with low and high levels of innovation, the results show that the reduction of CO 2 emissions is more significant in countries with high innovation investment. Additionally, the study also establishes that country-level governance factors all have a negative impact on the relationship between innovation investment and CO 2 emissions, suggesting that good governance is necessary for the effective use of innovation to reduce emissions.
Studies  Awan et al. (2022d) have investigated the relationship between economic growth, environmental degradation, and various other factors, such as urbanization, innovation, financial development, natural resource rent, and energy consumption, among others. Hossain et al. (2023) found that economic activities have a significant impact on environmental quality in India, and an N-shaped Environmental Kuznets Curve (EKC) hypothesis for CO 2 emissions was validated. Awan et al. (2022b) found an N-shaped EKC curve for transport sector carbon dioxide emissions in 33 high-income countries and recommended a shift to non-motorized and public transportation systems. Ngoc and Awan (2022) failed to find a clear impact of financial development on the ecological footprint in Singapore, but Bayesian analysis showed a negative impact of financial development and economic growth, and a positive impact of human capital.  found that natural resource rent, energy consumption, and foreign direct investment harm the environment in Mexico, but technological innovation has a positive impact in the long-run. Awan et al. (2022c) found evidence of an inverted U-shaped relationship between GDP and CO 2 emissions in 107 countries, supporting the EKC hypothesis. Awan et al. (2022a) found an inverted U-shaped relationship between economic growth and environmental degradation in 10 emerging countries. Awan et al. (2022d) found a U-shaped relationship between urbanization and the environment in Malaysia and supported the EKC hypothesis.

Theoretical framework
The theoretical understanding of the relationship between CO 2 emissions and population, GDP, eco-innovation, financial development, governance, and globalization, and how governance can moderate the impact of ecoinnovation, financial development, and globalization on CO 2 emissions is explored in this section.
Population growth can have a significant impact on CO 2 emissions, as it drives increased energy consumption, resource usage, and waste production. An increase in GDP has been associated with an increase in CO 2 emissions, as higher levels of economic activity lead to increased consumption and production, which can result in higher emissions. However, this relationship is not straightforward and is influenced by a range of other factors, including changes in consumer behavior, land use changes, and industrial processes. On the other hand, GDP squared has been shown to have a mitigating effect on CO 2 emissions, with higher levels of economic development and income being associated with lower emissions. This relationship can be attributed to a range of factors, including shifts towards service-oriented economies, greater investment in renewable energy and low-carbon technologies, and changes in consumer behavior as people become more environmentally conscious. Additionally, as countries become more economically developed, they are often able to adopt more advanced and efficient technologies, which can lead to lower emissions in various sectors. This relationship is often referred to as the Environmental Kuznets Curve (EKC) hypothesis.
Globalization can impact CO 2 emissions in both positive and negative ways. On one hand, globalization can increase CO 2 emissions through increased trade liberalization, transportation, and the transfer of carbon-intensive technologies to developing countries. On the other hand, globalization can also decrease CO 2 emissions through the transfer of low-carbon technology, green trade agreements, the development of alternative energy sources, and international environmental agreements which incentivize countries to adopt more sustainable production practices. The net impact of globalization on CO 2 emissions will depend on the balance between these positive and negative factors. Governance can moderate the impact of globalization on CO 2 emissions by regulating trade practices to only allow environmentally friendly products, creating environmental policies and standards, promoting alternative energy sources, and enforcing international environmental agreements. These actions can reduce demand for carbonintensive goods, reduce emissions, increase transparency and accountability, and promote sustainability. While governance can play a role in moderating the impact of globalization on CO 2 emissions, there are also situations where globalization can increase emissions, particularly through the pressure to lower environmental standards, the transfer of carbon-intensive production processes, favorable trade policies, and the lack of enforcement of environmental regulations.
Financial development can increase CO 2 emissions by promoting economic growth and consumption, but it can also decrease CO 2 emissions by promoting technological progress, investment in clean energy, and the adoption of environmental regulations and policies. Governance plays a crucial role in moderating the impact of financial development on CO 2 emissions. Good governance can enhance the favorable effects of financial development on environmental quality by reducing CO 2 emissions. This can be achieved through several means such as ensuring the effective implementation of environmental regulations, attracting investment in clean energy, and promoting the development of financial instruments for clean energy investment. On the other hand, weak governance can undermine these effects by increasing corruption, deterring investment, and limiting the development of financial instruments for clean energy investment.
Environmental innovation is a crucial component in the effort to reduce CO 2 emissions and mitigate the impacts of climate change. By introducing new technologies, products, and processes that are designed to reduce the negative impact of human activities on the environment, environmental innovation can play a key role in reducing CO 2 emissions. This can be seen through mechanisms such as increased energy efficiency, the adoption of clean energy sources, improved waste management practices, and the reduction of resource usage and waste production through resource efficiency. Overall, the implementation of environmental innovation can help to create a more sustainable future, reducing the impact of human activities on the environment and mitigating the challenges of climate change. When governance is used as a moderator in conjunction with environmental innovation, the impact on CO 2 emissions can be even greater. Improved governance can help to create a favorable market environment for environmental innovation, promoting the development and implementation of new technologies and products. It can facilitate the transfer of technologies and knowledge between countries and regions, promoting the widespread adoption of environmentally friendly technologies and reducing emissions. In addition, good governance can provide the support necessary for the research and development of new technologies and processes designed to reduce emissions, such as carbon capture and storage. Moreover, it can help to raise consumer awareness about the importance of reducing emissions and promote the adoption of environmentally friendly products and practices.

Models and methodology
The current study follows and extends the IPAT model proposed by Ehrlich and Holden (1971) and Dietz and Rosa (1994). IPAT model links the environmental effect (I) to population (P), development (A), and technology (T). However, the current study incorporates some other important variables that may appear to be critical in affecting the environment. Keeping in view the available literature, the environmental innovation, globalization, financial development, and governance are also taken into account (Kalayci and Hayaloğlu 2019;Khan et al. 2019c;Villanthenkodath and Mahalik 2020;Wang et al. 2020b).
In Eq.
(1), I shows environmental impact, a is constant, P represent population, A is used to measure economic development, and T denotes the technological innovation. 1 , 2 , and 3 are the parameters, while e denotes residual term. The above specification is a typical IPAT model. This can be extended as follows: In specification (2) Glob is representing globalization, F denotes financial development, and G indicates governance. Taking Eq. (2) in logarithmic form yields Environmental degradation is measured by carbon emissions (CO 2 ) as it is considered to be a major pollutant. Hence, current study evaluates the impact on CO 2 emissions. Various studies have confirmed that the role of technological innovation is significant in reducing CO 2 emissions (Sagar and Holdren 2002;Sohag et al. 2015), but there are some technological innovations which are not specific to impart its impact on CO 2 reduction. These technologies and R&D expenditures are not directly effecting the environment. Therefore, in this study, we are specific by taking environmental innovations (EI) as these innovations are more explicit in lessening the environmental damages. GDP is used as a proxy for economic development; thus, the symbol "A" is replaced by GDP. The estimate able model for the sample of selected south Asian countries is specified in Eq. (4).
Model 1 In the next model we have added GDP squared term to check the validation of Environment Kuznets Curve (EKC). In this analysis, remaining variables are same as logI t = loga t + 1 logP t + 2 logA t + 3 logT t + 4 logGlob t + 5 logF t + 6 logG t + loge t (4) logCO2 it = loga it + 1 logP it + 2 logGDP it + 3 logEI it + 4 logGlob it + 5 logF it + 6 logG it + loge it used in model 1. The nonlinear model 2 is unique in determining EKC along with environmental innovations, global integration, financial development, and governance. The model is as follows: Model 2 In models 3, 4, and 5, governance index is used as a moderator to observe the government effectiveness in context of environmental innovations, global integration, and financial development along with EKC. The specifications are given as follows: Model 3 Model 4 Model 5 Standard panel data procedure is followed in order to obtain the outcomes of the current study; therefore, as a prerequisite panel unit root test is applied. Cointegration analysis is also presented by using Pedroni (1999Pedroni ( , 2004, Kao (1999), and Westerlund (2007) test of cointegration. In order to tackle the issue of cross-sectional dependencies as it is common in panel data analysis, Westerlund (2007) cointegration test is applied. The coefficient is estimated by panel robust least square. The applied technique deals with the issues of outlier, multicolinearity, and non-normality of the data. Moreover, robustness of results is also checked by using fixed effect model that followed Mundlak procedure. The results of Model 1 to Model 5 are obtained by applying both panel robust least square and fixed effect techniques.

Data and variables
In the current study, the sample of selected five South Asian countries is taken into consideration. Annual data of Bangladesh, India, Pakistan, Nepal, and Sri Lanka are studied over the period of 1996 to 2019. Bhutan, Afghanistan, and Maldives are not taken into consideration due to data availability issues. The detail of each variable is given below:

Carbon emissions (CO 2 )
CO 2 emissions are the major greenhouse gas that releases during human and economic activities. It causes environment degradation, particularly global warming. Carbon emissions result primarily due to combustion of fossil fuels, such as oil, coal, and natural gas and cement manufacturing. The current study uses CO 2 emissionsto measure environmental degradation. Data of CO 2 emissions (metric tons per capita) is obtained from World Bank database (www. data. world bank. org). It includes CO 2 emissions from combustion of fossil fuels and cement manufacture; however, land use such as deforestation emissions is excluded as per the definition of World Bank database.

Population (P)
Population is taken in millions for a given period, and it is acquired from the World Bank database (www. data. world bank. org). It is defined by adding all the residents of a country irrespective of their legal status of citizenship; however, it excludes refugees.

Gross domestic product (GDP)
Data on real GDP per capita (constant 2015 US$) is also obtained from the World Bank database (www. data. world bank. org). It is calculated by dividing GDP to midyear population.

Environmental innovations (EI)
Environmental innovations are the environmental friendly techniques. These technologies emit less greenhouses gases as compared to traditional technologies, hence, put less pressure on environment. It is more focused in changing the products and production process that promote sustainable development. Various indicators can be used to measure environment innovation such as green finance, percentage of expenditure on environmental technologies, and number of patents. In the current study, it is measured by patents in environmental technologies, and data are collected from OECD database (www. stats. oecd. org).

Globalization index (Glob)
Globalization is the international interdependence of nation economies in trade and commerce. It is also referred as a flow of goods, finance, information, technology, and culture worldwide. Globalization is multidimensional phenomena and can be explained with the help of using multiple variables. The current study uses KOF globalization index. It is the composite of three dimension including economic, political, and social globalizations. It is a comprehensive index to measure global integration using various indicators of economic, financial, political, social, and cultural aspect. It ranges from zero to 100; values closer to 100 (0) indicate higher (lower) level of global integration among economies. Data on this index are obtained from ETH Zurich Database (www. kof. ethz. ch).

Financial development index (FD)
Financial sector development is the integral part of economic growth. It occurs when financial sector provides such instruments, institutions, and frameworks that allow ease in transactions and overcomes the costs of financial system. Financial sector development is measured by using multiple indicators that observe each important dimension of this sector. Hence, the current study uses an index that is developed by IMF. It is a comprehensive index, which is constructed on the basis of six indicators of financial institutions and markets. The indicators that measure the depth, access, and efficiency of financial institutions and financial market are used for the construction of this index. It ranges from zero to one, and higher value of the index shows higher financial development. Data are collected from IMF database (www. data. imf. org).

Governance index (GI)
Governance is referred as political, administrative, and organizational authority to observe economic and non-economic issues of a country. Authority is exercised through institutions which effectively design and implement policies. It is measured by using six important dimensions that are indicated in worldwide governance indicators. It includes (i) corruption control, (ii) effectiveness of the government, (iii) political stability and absence of violence/terrorism, (iv) regulatory quality, (v) rule of law, and (vi) voice and accountability. The data on these variables are collected from World Bank databank (www. databank.worldbank.org). Two step procedure is followed to construct governance index. In the first step, min-max technique is used to normalize each dimension. In the next step, index is constructed by assigning equal weights. The procedure for the construction of the governance index is provided below: where j is the equal weight which is assigned to the corresponding variable and X j is the scale free observation of the j th variable which follows min-max normalization procedure. The index ranges from zero to one, indicating good governance for the values closer to one. Table 1 shows descriptive statistics of all the variables that are used in obtaining the results of current study. Mean median, maximum-minimum values, and standard deviation of each variable are provided in the given table. Skewness measures the asymmetry of the distribution. All the series are positively skewed expect for the series of globalization which is negatively skewed. Kurtosis measures the heaviness of the tail, or it is a measure of peakness or flatness of the distribution. Normal distribution has kurtosis 3; however, the data series of CO 2 emissions, population, GDP, and environmental innovations have higher values indicating positive Kurtosis (peaked curve), while globalization, governance, and financial development have lower values, hence, have negative kurtosis (flatted curve). It can be concluded that in either case all the series are indicating non-normality. Moreover, peaked curve is also indicating existence of outliers. Jarque-Bera test also checks the normality of the distribution with the null hypothesis of normal distribution. The probability value of all the data series rejects the null hypothesis and implies that the distributions are non-normal.

Results and discussion
As a preliminary, stationarity has been checked for all the series under analysis. Levin et al. (2002), Pesaran and Shin, and Fisher types test are used in order to test the stationarity.
These tests have common null hypothesis, stating the condition of non-stationarity, while, alternate hypothesis deviates in defining the coefficient to be homogeneous or heterogeneous. In this regard, Levin et al. (2002) permit homogeneous autoregressive coefficient in alternative hypothesis, whereas rest of the tests inflicts heterogeneity. The results are displayed in Table 2. All the variables are found to be stationary at first difference, i.e., I(1).
The result of Table 1 implies that it is desirable to check cointegration among the variables under consideration. Hence, the cointegration test of Pedroni (1999Pedroni ( , 2004 can be applied. It is based on pooling within and between dimensions, allowing for heterogeneity in the autoregressive term. The test is related to total seven statistics, distributed into two parts. The first part indicates four statistics which include panel v-statistics, panel rho-statistics, panel PP-statistics, and panel ADF-statistics, whereas three statistics containing group rho-statistics, group PP-statistics, and group ADF-statistics are presented in the second part. The cointegration test proposed by Kao (1999) is also applied as it allows homogeneous coefficients. The results are presented in Table 3. Table 3 shows mixed result; therefore, the decision will be based on majority. Among the seven statistics, four statistics reject the null hypothesis of no cointegration, thus, favoring long-run cointegration among the variables. Kao (1999) test is also in line with Pedroni (1999Pedroni ( , 2004 test and provides support for cointegration among the variables. Westerlund (2007) test of cointegration is also applied; it  Table 4. All the three tests of cointegration indicate that there is the existence of long-run relation among the variables. The next step is the estimation of coefficients. For this purpose, robust least square procedure is chosen. It is appropriate as the sample size is relatively small, and it also takes into consideration the issue of outliers. Robust least square generates reliable results as it handles multicollinearity, nonnormality, and missing values of the data set. Descriptive statistics shows that the data distribution is not normal, and there is also the existence of outliers; hence, it is suitable to apply panel robust least square. In addition, estimates of fixed effect are also obtained based on Mundlak technique. It augments the random effects specification with variables that captures the time-varying correlation between regressors and individual effects. In comparison to the Hausman  test, the Mundlak approach identifies the regressors correlated with individual effects.The outcomes are displayed in Table 5. In model 1, by applying robust least square all the variables are appeared to be significant except for the variable of financial development. The association between GDP and environment degradation has always been a debatable issue in literature. However, the finding of current study shows that GDP is contributing in CO 2 emissions. Economic growth is directly linked with higher production of goods and services, hence, creating environment degradation. Moreover, higher economic activities increase the energy demand which also results in more carbon emissions due to the dependence of developing countries on nonrenewable energy resources.
The coefficient of population is also significant and raises the level of CO 2 emissions in environment. Population growth is tightly and directly linked with environment degradation and climate change. Every additional individual increases CO 2 emissions via the channel of consumption demand. It raises the demand of gas, oil, coal, and other fuels, thereby, causing rapid depletion of natural resources. Furthermore, residential need of growing population shrinks the forest area and increases the number of pollutant in air, hence, creating environment damage. Population growth imposes greater environmental threat not only for south Asian countries but also for entire globe.
The next coefficient is environmental innovations, which is significant and shows favorable impact on environment. The result is in line with the previous studies as for example Danish and Ulucak (2020) and Guo et al. (2021) observed the importance of environment-related technologies in reducing CO 2 emissions. Similarly, Tariq et al. (2022) have also shown beneficial effect of environmental technology in South Asia countries. Technological innovation, particularly environment-related advancement, is important in achieving the goal of sustainability. Environmentally friendly technology and equipment reduce CO 2 emissions, leading to an improvement in environmental quality. There are various direct and indirect channels of these innovations that can affect the rate of carbon emissions. For instance, improvement and efficiency of production structure reduce the energy use which is directly linked to the environmental quality. Moreover, green innovation decreases the intensity of emissions by raising the level of renewable energy consumption. These technologies are desirable in order to restore the balance of ecosystem.
Globalization is also increasing carbon emissions. In this study, overall globalization is taken into consideration which involves all the major aspects of globalization including economic, political, and social dimensions. Globalization increases the international integration among countries through trade flows. Production activities at mega scale and then trade of these goods and services among different regions of the globe put lot of pressure on environment. In order to achieve the export targets, developing countries increase the use of fossil fuel which raises the level of CO 2 emissions. Furthermore, globalization stimulates basic economic activities all over the globe which is deteriorating the environment. Similar findings are observed in the studies of Haseeb et al. (2018) and Khan et al. (2022) in South Asia.
Governance and its dimensions play a critical role in mitigating the effect of CO 2 emissions. Different dimensions may have varying effects on the rate of emissions. However, in the current study, governance index appeared to have unfavorable effect on environment. Hence, the role of government institutions seems to be powerless in decreasing CO 2 emissions, particularly in South Asian region. There are various plausible explanations to observe the link between governance and CO 2 emissions. For instance, corruption weakens the institutional performance and, therefore, weakens the role of regulatory authority which may result in environmental degradation. In model 1, fixed effect estimates also show same result except for the variable of population which appeared to be insignificant. In model 2, the validity of EKC is tested in sample data. The results of non-linear model show that traditional hypothesis is valid in South Asian region. M. Khan et al. (2019c) and Murshed and Dao (2022) also observed EKC in South Asia. It demonstrates that moving on development scale when certain income level is achieved, there starts a turning point of curve which exhibits the reduction in environmental degradation. More specifically, it is the movement from polluting industrial economy to cleaner economy. In this range, now the focus of the economies is to achieve the target of growth without hurting environment. For this, various environmental friendly techniques and procedures are adopted to reduce CO 2 emissions. The empirical results of this model are almost similar to the one which are obtained in previous model except for the variable of financial development. In this analysis, financial development is significant and increasing CO 2 emissions. Tahir et al. (2021) also showed the adverse effect of financial development on environment in South Asian region. There are various direct and indirect channels through which financial sector development increases pressure on environment. For instance, it attracts foreign direct investment which enhances economic activities, thereby contributes in carbon emissions. Furthermore, development in this sector decreases financial cost, thus pollutes environment through higher energy use. Well-developed and efficient financial structure simplifies loan facilities which directly increases the consumption of durables and automobile, thereby contributes in carbon emissions. Fixed effect technique also validates EKC in Model 2. The direction of all the coefficient is same as reported by robust least square with the exception of population and a financial development which is turned out to be insignificant.
Model 3, 4, and 5 are formulated to analyze the role of governance as a moderator. The empirical results are displayed in Table 6, aimed at testing the validity of EKC and governance as a moderator in each model. Model 3 shows the interaction between environmental innovation and governance. In this case, all the variables are significant, and EKC is valid. Moreover, environmental innovations are decreasing CO 2 emissions, and along with the role of governance, the magnitude of the coefficient has slightly increased. It implies that the role of governance is influential in facilitating the environment-friendly techniques. The sustainable development approach is the priority area of each country government. Therefore, pursuing the environmental policies is helpful in achieving this target. Fixed effect replicates the same results for model 3.
The model 4 introduces the interaction term of governance and globalization. The result shows that the coefficient of globalization is insignificant. However, the interaction coefficient appeared to be significant but contributes in environment degradation. It shows that the role of government in stimulating the process of globalization overshadows the environmental targets. In order to get the economic benefits of liberalization, the governments of South Asian regions  are compromising on environmental quality. For instance, foreign companies are operating in these regions with less restrictive environmental conditions, thereby contributing to the rate of emissions. Hence, globalization brings benefits but at the cost of the environment. It is pertinent to mention that the magnitude of the coefficient has marginally decreased, which implies insufficient effort of government in affecting the intensity of carbon emissions. Similar results are obtained by using fixed effect model; however, the coefficient of globalization turned out to be significant. In model 5, the role of governance is analyzed with financial development. In this analysis, both techniques show that financial development is insignificant, but interaction term turned out to be significant having an unfavorable impact on the environment. On one side government is effective in developing the efficient financial structure, but no such coordination or link is found to ease environmental challenges. One of the reasons is the lack of green financing in financial system which may lead to higher rate of emissions. Hence, it can be concluded from the current analysis that the role of government is only influential in case of tackling the direct policy parameter, i.e., environmental innovation. However, the cases where government needs to establish a coherent policy with environmental sustainability are missing, as in case of globalization and financial development.

Conclusion and policy implication
Based on a sample of South Asian countries from 1996 to 2019, this study examines the associations among environmental innovations, globalization, financial development, governance, and CO 2 emissions in the context of the EKC hypothesis and the moderating role of governance in this relationship. In the first step, stationarity has been checked for all the series under analysis by using Levin et al. (2002), Pesaran and Shin, and Fisher types tests. The next step is the estimation of coefficients. For this purpose, robust least square procedure is chosen.
The empirical result indicates that globalization, financial development, and governance are decreasing the environmental quality, while environmental innovation has significantly improved the environmental quality. Various measures can be taken in order to curtail the adverse effects of globalization. In those nations with less stringent environmental standards, the government of these nations may impose taxes on CO 2 emissions, which is a surefire approach to reducing carbon emissions. The government should make agreements to decrease the environmental pollution. Moreover, through seminars, conferences, and workshops, societies and governments in developing economies should raise public knowledge of CO 2 emissions. The unfavorable impact of financial development via economic growth of a country is associated with increased energy demands. As financial institutions expand, they may also provide financing for industries and activities that are heavy emitters of greenhouse gases, therefore, contributing to the rise in carbon emissions. It is important to note that while financial development may have negative effects on the environment, it can also be a crucial tool in addressing the challenge of climate change if properly managed. In the context of South Asian economies, the relationship between financial development and increasing CO 2 emissions has important policy implications. To mitigate the negative effects, the governments of these countries can take a number of steps. Firstly, they can implement policies that encourage the growth of environmentally friendly industries and discourage the expansion of heavy emitting sectors. Secondly, they can improve governance and regulation in the financial sector to ensure that financial institutions do not provide financing for activities that harm the environment. These policies will help South Asian economies balance the need for economic growth with the need to protect the environment and address climate change.
Therefore, the governments of South Asian economies must focus on the allocation of resources and diversification of the facilities for the achievement of environmental sustainability. The governance index also appeared to have an unfavorable effect on the environment, showing the inability of the government in addressing environmental challenges.
The study reveals that environmental innovations show significant favorable impacts on the environment. This finding is consistent with the previous literature as green technology always serves as a powerful tool in reducing CO 2 emissions. Another important and interesting finding of the study is the estimations of GDP and square GDP. It implies that there is compelling evidence for an inverted U-shaped EKC hypothesis relationship in the context of South Asian nations.
The results of models 3, 4, and 5 are more fascinating and incorporate the moderating role of governance for globalization, financial development, and environmental innovation, which are our main contributions to this study, and show some additional insights.
Model 3 shows that environmental innovations decrease CO 2 emissions. Along with the role of governance, the magnitude of the coefficient has slightly increased indicating that governance strengthens the negative relationship between environmental innovation and CO 2 emissions. Increased spending on environmental technology, such as renewable energy technologies, and R&D in the clean energy industry, which has higher economic performance, should be a priority for policymakers. This should eventually result in less pollution. We also contend that improved governance and environmental innovation result in decreased CO 2 emissions.
Our findings imply that environmental issues must be integrated into government and that environmental innovation can reduce carbon emissions. Therefore, governments and politicians in these nations must introduce green innovation into their systems to successfully address the escalating environmental concerns. The focus should be placed on how green patents affect the environment. Hence, it is necessary to create policies to ensure innovation in the green sector.
The result of model 4 and 5 shows that the coefficient of globalization and financial development is insignificant. However, the interaction term between globalization and governance and financial development and governance degrades environmental quality. It shows the diluted role of government in effecting CO 2 while promoting globalization and financial development. Environmental problems will likely get worse as a result of the likely rise in energy use as globalization and financial development have expanded in developing economies. Developing nations should switch to renewable energy as their primary energy source. Additionally, the government should concentrate on promoting trade among developing nations by exchanging environmentally friendly goods, renewable energy sources, and technology, such as hydro power, sunlight, wind, biomass power, geothermal heat, waste base energy, and solar power, as well as by implementing environmental regulation policies like imposing a carbon tax/quota system on emission-intensive goods, which could help to reduce environmental damage. Moreover, there is a need of more and more green financing while establishing this sector in order to combat environmental degradation. Another policy implication could be to strengthen governance structures and institutions that are responsible for environmental protection and management. This could include increasing transparency and accountability in decision-making, improving access to information and public participation in environmental decision-making, and enhancing the capacity of regulatory bodies to enforce environmental laws and regulations. Hence, it can be concluded from the current study that government is successful in achieving the target of environmental sustainability by introducing and promoting environmental innovations, but unfortunately the due role is missing along with globalization and financial development. In this scenario, policy implications can be aimed at further promoting environmental innovation and strengthening governance structures to continue to enhance environmental quality. For South Asian countries, one policy implication could be to increase investment in research and development for environmental technologies and innovations. This could include providing financial incentives for companies and individuals engaged in developing environmentally friendly solutions and products. Another policy implication could be to establish a favorable regulatory environment for the diffusion and adoption of these technologies. This could include streamlining the approval process for new technologies and reducing barriers to entry for environmentally focused startups. In addition, there is a need for the government to play a role in promoting the uptake of these innovations by creating a demand for eco-friendly goods and services. For example, the government could phase out the use of fossil fuels through regulations or incentives. Additionally, the government can encourage the private sector to adopt sustainable practices by requiring companies to disclose their environmental impact or by awarding eco-friendly certifications. Most importantly, governance can decrease CO 2 emissions by raising awareness about the issue of climate change and the importance of reducing carbon emissions. Therefore, governance can decrease CO 2 emissions by raising awareness through education, implementing regulations and policies, investing in green technology, offering incentives and subsidies, and participating in international cooperation. Effective governance can lead to a reduction in CO 2 emissions and a more sustainable future.
Author contribution Both authors contributed to the paper. Methodology, data collection, and analysis were performed by AN. The introduction, literature review, theoretical framework and conclusion were written by MA. Both authors reviewed and approved the final manuscript.
Data availability Data and relevant materials will be available on request.

Declarations
"I have not submitted my manuscript to a preprint server before submitting it to Environmental Science and Pollution Research" Ethical approval Not applicable.

Competing interests
The authors declare no competing interests.