Assessing the impact of renewable energy and financial development on environment quality in Asian emerging economies (AEEs)

Usman Saleem Yousaf (), Farhan Ali (), Babar Aziz (), Shahzad Hussain () and Saima Sawar ()
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Usman Saleem Yousaf: Government College University Lahore
Farhan Ali: Government College University Lahore
Babar Aziz: Government College University Lahore
Shahzad Hussain: Government College University Lahore
Saima Sawar: Government College University Lahore

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 7, No 51, 16345-16369

Abstract: Abstract Even though the confluence of energy, growth, and environment has been a comprehensive concern matter of researchers and policymakers for decades. However, scarce literature found about this matter, particularly in the case of Asian Emerging Economies (AEEs), which are considered leading energy consumers. This study fills this gap in 12 AEEs from 1990 to 2022. For this purpose, we use the most recent proxy, ecological footprint (EFP), instead of CO2 emissions for the environment quality as regress and, whereas domestic credit (DCr), a proxy for financial development (FD), renewable energy consumption (REnC), foreign direct investment net inflow (FDINI), population growth (POP), and economic growth (GDP) as regressors. To obtain consistent, efficient and robust outcomes, we apply various first and second-generation econometric methodologies on balanced longitudinal data. Resultantly, Breusch-Pagan and Pesaran Scaled LM tests confirm the dependence of the cross-sections. Breitung, I'm Pesaran & Shin, and CIPS tests infer that most indicators are stationary at the first difference. Westerlund bootstrap, Pedroni, and Kao verify the cointegration. Pooled mean group (PMG) and nonlinear PMG outcomes expose that REnC has a statistically significant but inverse relationship with the EFP, enduring better ecological health. In contrast, FD, FDINI, and POP worsen the environmental condition. A significant Environmental Kuznets Curve (EKC) also exists in both cases. In the short run, no noticeable relationship exists. We also use Dumitrescu and Hurlin’s (D-H) cross-panel causation test to witness the causalities. Based on the findings, we recommend renewable energy consumption rather than conventional energy use since it is negatively associated with the ecological footprints on one side. On the other hand, we recommend reducing FD, FDINI, and control POP.

Keywords: Renewable energy; Financial development; Ecological footprint; Pooled mean group; Nonlinear PMG; Westerlund; CIPS (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-024-04587-5

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