Modelling the dynamic linkages between eco-innovation, urbanization, economic growth and ecological footprints for G7 countries: Does financial globalization matter?

• It explores the impacts of financial globalization on environment in G7 countries. • Economic growth and urbanization increase the ecological footprints. • Financial globalization and eco-innovation decrease the ecological footprints. • It reveals significant moderating effects of eco-innovation on urban sustainability. • The findings validate the EKC hypothesis for G7 countries. The G7 nations, despite flourishing economically, have not succeeded in ensuring environmental welfare in tandem. However, these nations cannot sustain their economic growth achievements without simultaneously safeguarding their environmental attributes. In this regard, this study aims to analyze the effects of financial globalization, urbanization, eco-innovation, and economic growth on the ecological footprints of the G7 countries. Using annual frequency data spanning from 1980 to 2016, several latest econometric methods, that are robust to handling cross-sectionally dependent panel datasets, are employed to ascertain the environmental impacts of these variables. The overall findings show that financial globalization and eco-innovation reduce the ecological footprints, while urbanization stimulates environmental degradation by boosting the ecological footprints. Besides, the relationship between economic growth and ecological footprints is found to be inverted U-shaped. Hence, the Environment Kuznets Curve hypothesis is found to hold in the case of the G7 countries. Furthermore, eco-innovation is found to exert an indirect favorable impact on the environment through the channel of urbanization. Thus, eco-innovation can be expected to facilitate sustainable urbanization in the G7 countries. In line with these crucial findings, this study recommends that the G7 countries should be more financially integrated, finance eco-innovation related projects, promote sustainable urbanization, and expedite economic growth rates through the sustainable transformation of their production and consumption processes.