Abstract
This empirical study examines the endogenous relationship between carbon emission (CO2), financial development, renewable energy, globalization, and institutional quality in 64 belt and road initiative countries (BRI) using a two-step system generalized method of moments (GMM) approach with panel data over the period 2003 to 2018. Furthermore, this study used (Dumitrescu & Hurlin, 2012) causality test to estimate the variables’ causal relationship. The results indicate that financial development significantly increases CO2 emissions and causes environmental degradation in BRI countries. However, renewable energy and globalization mitigate CO2 emission and improve the quality of the environment. Institutional quality was found to be positive in correlation with CO2 emission and indicates bad governance, corruption, weak bureaucracy, and improper implementation of environmental laws cause environmental degradation. Further, the study also reports a bidirectional relationship of financial development, renewable energy, and institutional quality with CO2 emission and a unidirectional causality running from globalization to CO2 emission in BRI countries. This study offers insight to policymakers to restructure the financial system, energy consumption pattern, and global integration and to improve institutions’ quality for a sustainable environment and the economy at the national and regional levels.
Assessment of the role of renewable energy consumption and trade policy on environmental degradation using innovation accounting: Evidence from the US
