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Renewable Energy Consumption, Water Crises, and Environmental Degradation with Moderating Role of Governance: Dynamic Panel Analysis under Cross-Sectional Dependence

Shazia Kousar (), Farhan Ahmed (), María de las Nieves López García () and Nimra Ashraf ()
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Shazia Kousar: Department of Economics, University of Jhang, Punjab 30000, Pakistan
Farhan Ahmed: Department of Economics and Management Sciences, NED University of Engineering and Technology (NEDUET), Karachi City, Sindh 75270, Pakistan
María de las Nieves López García: Department of Economics and Business, University of Almería, 04120 Almería, Spain
Nimra Ashraf: Department of Management Sciences, The Superior College Lahore City, Punjab 30000, Pakistan

Sustainability, 2020, vol. 12, issue 24, 1-16

Abstract: This study aims to investigate the relationship between renewable energy consumption, water availability, and environmental degradation with the moderating effect of governance in the South Asian region. This study collected data for renewable energy, water availability, governance, and environmental degradation for the period of 1988 to 2018 from the World Development Indicator. In panel data estimation, if cross-sectional dependence exists, it produces biased estimates. Therefore, this study applied a newly developed technique, dynamic common correlated effect, which produces efficient estimates in the presence of cross-sectional dependence. This study found that foreign direct investment positively and significantly increases environment degradation (β = 0.69 *, * indicates the significance level at less than 1%) while renewable energy and water availability cause to reduce environment degradation (β = −0.08 **, β = −0.09 **, **indicates the significance level at less than 5%). Moreover, the study also found that governance significantly strengthens the relationship of renewable energy and water availability with environment degradation (β = 0.37 **, β = 0.24 **) while governance significantly weakens the relationship of foreign direct investment and environmental degradation (β = −0.34 *). The study suggests that South Asian countries should improve political institutions, and promote renewable energy, water availability, and clean production to improve the environment quality.

Keywords: renewable energy consumption; water availability; foreign direct investment; institutional quality; environmental degradation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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