Environmental Sustainability and the ILCC Hypothesis: The Role of Life Expectancy, Policy Stringency, and Renewable Energy in BRICS

Yasin Acar, Mehmet Metin Dam, Funda Kaya and Ayse Durmaz

Australian Economic Papers, 2026, vol. 65, issue 2, 164-176

Abstract: Environmental sustainability has emerged as a primary policy imperative in the global battle against climate change. Yet, there remains a notable deficiency in efforts to ensure sustainability and formulate effective policies, particularly within developing economies. To address this crucial gap, we investigate the inverted load capacity curve (ILCC) hypothesis, analyzing the influence of life expectancy, environmental policy stringency, and renewable energy consumption on environmental sustainability across BRICS nations from 1998 to 2020. Utilizing annual panel data, we introduce the inverted load capacity factor (ILCF) variable as a more comprehensive measure of load capacity excess, essential for assessing environmental sustainability. Employing heterogeneous panel data techniques, including canonical cointegrating regression and the fully modified least squares estimator, we account for cross‐sectional dependence and slope heterogeneity to yield unbiased and consistent estimates. Our findings underscore several key points: firstly, life expectancy and economic growth positively impact ILCF; secondly, increased renewable energy consumption contributes to enhanced environmental sustainability; thirdly, the effect of environmental policy stringency on ILCF varies; finally, the validity of the ILCC hypothesis is confirmed for BRICS nations, suggesting an inverted U‐shaped relationship between real income and ILCF. These results advocate for prioritized renewable energy investments by decision‐makers and policymakers in BRICS countries.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:65:y:2026:i:2:p:164-176

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