Limiting global warming to 1.5°C: Conditioning effects of financial flows and regulatory quality on green technological innovation-emission nexus

Climate change mitigation requires understanding how green technological innovation (GTI) interact with institutional and financial mechanisms to reduce carbon emissions. Despite extensive research on GTI's environmental impacts, limited studies examine how financial flows (FF) and regulatory quality (RQ) simultaneously moderate GTI-emissions relationship, particularly in advanced economies that significantly influence global climate policy. This study addresses this gap by investigating the environmental effects of GTI in G7 nations while accounting for the interactive roles of RQ and FF over the period of 1996–2020. The G7's significance stems from its contribution to 75 % of the global official development assistance, 44 % of global nominal GDP, and its leadership in climate policy frameworks, making it a critical context for developing effective decarbonization strategies. Employing a panel dataset and robust econometric models that address residual cross-sectional dependence, slope heterogeneity, heteroscedasticity, and serial correlations, the study utilizes the Driscoll-Kray standard errors technique for coefficient estimation. The analysis confirms that GTI and FF enhance environmental quality by reducing CO 2 emissions, while RQ and renewable energy paradoxically worsen environmental quality. Critically, RQ and FF negatively moderate the GTI-CO 2 emissions nexus, indicating that these factors enhance the pollution mitigation effects of green innovations in the G7. These findings suggest policymakers should prioritize strategic GTI investments while strengthening regulatory frameworks and channeling financial flows toward sustainable technologies. Recommended polices include carbon pricing mechanisms, green bonds, targeted subsidies, enhanced regulatory transparency, and coordinated finance-innovation strategies aligning economic incentives with environmental objectives. This research demonstrates that institutional quality and financial mechanism amplify GTI's environmental benefits, providing actionable insights for achieving SDG 13 and the 1.5 °C target. • Interactive analysis of GTI, financial flows, and regulatory quality on emissions. • Uses Driscoll–Kraay standard errors to address cross-sectional and serial dependence. • Evidence that financial flows amplify green innovation's emission-reduction impact. • Finds stringent regulatory quality can weaken GTI's effectiveness in G7 economies. • Robustness checks include ecological footprint, alternative measures, and quantile regression.