Abstract
This paper investigates the role of institutional quality in moderating the impact of energy consumption on CO2 emission, with other variables such as trade, capital formation, FDI, financial development and population in 39 developing countries for 1995–2017. We use mean group (MG), augmented mean group (AMG), common correlated effects mean group (CCEMG) estimator, dynamic system GMM, panel grouped-mean FMOLS and panel quantile regression for the empirical results. From the different estimation techniques, we find that institutional quality moderates energy consumption and strengthens its effectiveness in abating carbon emissions. The combined influence of institutional quality and sector wise energy consumption on emissions is significant and negative. Our finding also confirms the Environmental Kuznets curve (EKC) hypothesis in the presence of institutional quality. Renewable energy consumption is also found to reduce emissions significantly in the long run. Given the importance of institutional quality and renewable energy in reducing CO2 emission, the policymakers need to improve the quality of institutions and deploy more renewable energy for final consumption to achieve long-term climate goals.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Data availability
The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.
References
Abdalla et al (2018) Does environmental Kuznets curve hypothesis exist? Evidence from dynamic panel threshold. J Environ Econ Policy 7(2):145–165. https://doi.org/10.1080/21606544.2017.1382395
Abid M (2016) Impact of economic, financial, and institutional factors on CO2 emissions: evidence from Sub-Saharan Africa economies. Util Policy 41:1–10. https://doi.org/10.1016/j.jup.2016.06.009
Abid M (2017) Does economic, financial, and institutional developments matter for environmental quality? A comparative analysis of EU and MEA countries. J Environ Manag 188:183–194. https://doi.org/10.1016/j.jenvman.2016.12.007
Adams S, Acheampong AO (2019) Reducing carbon emissions: the role of renewable energy and democracy. J Clean Prod 240:118245
Ali et al (2019) Does quality institutions promote environmental quality? Environ Sci Pollut Res 26:10446–10456. https://doi.org/10.1007/s11356-019-04670-9
Amin A, Altinoz B, Dogan E (2020) Analyzing the determinants of carbon emissions from transportation in European countries: the role of renewable energy and urbanization. Clean Techn Environ Policy 22:1–10
Azam M, Liu L, Ahmad N (2020) Impact of institutional quality on environment and energy consumption: evidence from developing world. Environ Dev Sustain:1–22
Bhat JA (2018) Renewable and non-renewable energy consumption-impact on economic growth and CO2 emissions in five emerging market economies. Environ Sci Pollut Res Int 25(35):35515–35530. https://doi.org/10.1007/s11356-018-3523-8
Bhattacharya M, Churchill S, Paramati S (2017) The dynamic impact of renewable energy and institutions on economic output and CO2 emissions across regions. Renew Energy 17:1481–1487. https://doi.org/10.1016/j.renene.2017.03.102
Bilgili F, Koçak E, Bulut Ü (2016) The dynamic impact of renewable energy consumption on CO2 emissions: a revisited Environmental Kuznets Curve approach. Renew Sust Energ Rev 54:838–845
Binz C, Gosens J, Hansen T, Hansen UE (2017) Toward technology-sensitive catching-up policies: insights from renewable energy in China. World Dev 96:418–437. https://doi.org/10.1016/j.worlddev.2017.03.027
Danish, Baloch M, Wang (2019) Analysing the role of governance in CO2 emissions mitigation: The BRICS experience. Struct Chang Econ Dyn 51:119–125. https://doi.org/10.1016/j.strueco.2019.08.007
Destek MA, Ulucak R, Dogan E (2018) Analyzing the environmental Kuznets curve for the EU countries: the role of ecological footprint. Environ Sci Pollut Res 25(29):29387–29396
Dietz T, Rosa EA (1997) Effects of population and affluence on CO2 emissions. Proc Natl Acad Sci 94(1):175–179. https://doi.org/10.1073/pnas.94.1.175
Dinda S (2004) Environmental Kuznets curve hypothesis: a survey. Ecol Econ 49(4):431–455. https://doi.org/10.1016/j.ecolecon.2004.02.011
Dogan E (2015) The relationship between economic growth and electricity consumption from renewable and non-renewable sources: a study of Turkey. Renew Sust Energ Rev 52:534–546. https://doi.org/10.1016/j.rser.2015.07.130
Dogan E, Seker F (2016a) Determinants of CO2 emissions in the European Union: the role of renewable and non-renewable energy. Renew Energy 94:429–439
Dogan E, Seker F (2016b) The influence of real output, renewable and non-renewable energy, trade and financial development on carbon emissions in the top renewable energy countries. Renew Sust Energ Rev 60:1074–1085
Dogan E, Turkekul B (2016) CO 2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23(2):1203–1213
Dogan E, Altinoz B, Madaleno M, Taskin D (2020a) The impact of renewable energy consumption to economic growth: a replication and extension of. Energy Econ 90:104866
Dogan E, Ulucak R, Kocak E, Isik C (2020b) The use of ecological footprint in estimating the environmental Kuznets curve hypothesis for BRICST by considering cross-section dependence and heterogeneity. Sci Total Environ 723:138063
Egbetokun S, Osabuohien E, Akinbobola T, Onanuga OT, Gershon O, Okafor V (2020) Environmental pollution, economic growth and institutional quality: exploring the nexus in Nigeria. An International Journal, Management of Environmental Quality
Ellis J (2010) The effects of fossil-fuel subsidy reform: a review of modelling and empirical studies. SSRN Electron J 1572397. https://doi.org/10.2139/ssrn.1572397
Friedman M, Friedman R (1990) Free to choose: a personal statement. Houghton Mifflin Harcourt, Orlando
Gielen D. (2017). Perspectives for the energy transition investment needs for a low-carbon energy system. IRENA. https://irena.org.
Glass & Newig (2019) Governance for achieving the sustainable development goals: how important are participation, policy coherence, reflexivity, adaptation and democratic institutions? Earth Syst Gov 2:100031. https://doi.org/10.1016/j.esg.2019.100031
Goldthau A, Witte JM (2010) The role of rules and institutions in global energy: an introduction. Global Energy Gov 2:1–21
Grossman M, Krueger B (1995) Economic growth and the environment. Q J Econ 110(2):353–377. https://doi.org/10.2307/2118443
Haider A et al (2018) The role of renewable and non-renewable energy consumption in CO2 emissions: a disaggregate analysis of Pakistan. Environ Sci Pollut Res 25:31616. https://doi.org/10.1007/s11356-018-3059-y
Hanif I, Aziz B, Chaudhry IS (2019) Carbon emissions across the spectrum of renewable and nonrenewable energy use in developing economies of Asia. Renew Energy 143:586–595
Hasnisah A, Azlina AA, Che CM (2019) The impact of renewable energy consumption on carbon dioxide emissions: Empirical evidence from developing countries in Asia. Int J Energy Econ Policy 9(3):135–143. https://doi.org/10.32479/ijeep.7535
Hsu A., Rosengarten C., Weinfurter A., Xie Y., Musolino E., & Murdock H. E. (2017). Renewable energy and energy efficiency in developing countries: contributions to reducing global emissions-third report. http://unep.org.
Ibrahim L, Law S (2014) Social capital and CO2 emission—output relations: a panel analysis. Social capital and CO2 emission—output relations: A panel analysis. Renew Suit Energy Rev 29:528–534. https://doi.org/10.1016/j.rser.2013.08.076
IEA & NITI Aayog (2020) Sustainable recovery. IEA Paris. https://www.iea.org/reports/sustainable-recovery. Accessed 22 May 2020
IEA World Energy Outlook (2019). IEA. https://www.iea.org/reports/world-energy-outlook-2019. Accessed 22 May 2020
Inglesi-Lotz R, Dogan E (2018) The role of renewable versus non-renewable energy to the level of CO2 emissions a panel analysis of sub-Saharan Africa’s Βig 10 electricity generators. Renew Energy 123: 36–43. https://doi.org/10.1016/j.renene.2018.02.041
Kasotia P (2007) The health effects of global warming: developing countries are the most vulnerable. UN Chron 2:48–49
Kasper W (2004) Economic freedom and development: an essay about property rights, competition and prosperity. Dat & Partners Logistics, New Delhi
Kuzemko C, Lockwood M, Mitchell C, Huggett R (2013) Governing for sustainable energy system change: politics, contexts and contingency. Energy Res Soc Sci 12:95–105. https://doi.org/10.1016/j.erss.2015.12.022
Kuzemko C, Lockwood M, Mitchell C, Huggett R (2016) Governing for sustainable energy system change: politics, contexts and contingency. Energy Res Soc Sci 12:95–105. https://doi.org/10.1016/j.erss.2015.12.022
Laegreid M, Povitkina M (2018) Do political institutions moderate the GDP-CO2 relationship? Ecol Econ 145:441–450. https://doi.org/10.1016/j.ecolecon.2017.11.014
Lau L et al. (2018), Role of institutional quality on environmental Kuznets curve: a comparative study in developed and developing countries. https://doi.org/10.1108/S2514-465020180000006007.
Lau LS, Choong CK, Kee Y (2014) Carbon dioxide emission, institutional quality, and economic growth: empirical evidence in Malaysia. Renew Energy 68:276–281. https://doi.org/10.1016/j.renene.2014.02.013
Law et al (2013) Institutional quality thresholds and finance – growth nexus. J Bank Financ 37:5373–5381. https://doi.org/10.1016/j.jbankfin.2013.03.011
Le HP, Ozturk I (2020) The impacts of globalization, financial development, government expenditures, and institutional quality on CO 2 emissions in the presence of environmental Kuznets curve. Environ Sci Pollut Res:1–18
Mahjabeen, N., Shah, S. Z., Chughtai, S., & Simonetti, B. (2020). Renewable energy, institutional stability, environment and economic growth nexus of D-8 countries.
McMichael AJ, Friel S, Nyong A, Corvalan C (2008) Global environmental change and health: impacts, inequalities, and the health sector. BMJ (Clinical research ed) 336:191–194. https://doi.org/10.1136/bmj.39392.473727.AD
Menegaki A (2008) Valuation for renewable energy: a comparative review. Renew Sust Energ Rev 12(9):2422–2437. https://doi.org/10.1016/j.rser.2007.06.003
Milliman SR, Prince R (1989) Firm incentives to promote technological change in pollution control. J Environ Econ Manag 17(3):247–265
Mombeuil C (2020) Institutional conditions, sustainable energy, and the UN sustainable development discourse: a focus on Haiti. J Clean Prod 254:120153. https://doi.org/10.1016/j.jclepro.2020.120153
Moutinho V, Madaleno M, Inglesi-Lotz R, Dogan E (2018) Factors affecting CO2 emissions in top countries on renewable energies: a LMDI decomposition application. Renew Sust Energ Rev 90:605–622
Muhammad, S., & Long, X. (2020). Institutional factors and CO2 emissions nexus: a comparative analysis on the basis of income level. J Clean Prod, 123539.
Nahman A, Antrobus G (2005) The environmental Kuznets curve: a literature survey. SAJE. 73(1). https://doi.org/10.1111/j.1813-6982.2005.00008.x
Pandey S, Dogan E, Taşkın D (2020) Production-based and consumption-based approaches for the energy-growth-environment nexus: evidence from Asian countries. Sustain Prod Consum 23: 274–281. https://doi.org/10.1016/j.spc.2020.06.006
Paramati SR, Ummalla M, Apergis N (2016) The effect of foreign direct investment and stock market growth on clean energy use across a panel of emerging market economies. Energy Econ 56:29–41. https://doi.org/10.1016/j.eneco.2016.02.008
Paramati SR, Apergis N, Ummalla M (2017) Financing clean energy projects through domestic and foreign capital: the role of political cooperation among the EU, the G20 and OECD countries. Energy Econ 61:62–71
Pesaran MH (2007). A simple panel unit root test in the presence of cross‐section dependence. J Appl Econom 22(2):265–312. https://doi.org/10.1002/jae.951
Pesaran, MH, Yamagata T (2008) Testing slope homogeneity in large panels. J Econom 142(1):50–93. https://doi.org/10.1016/j.jeconom.2007.05.010
Purcel A (2020) New insights into the environmental Kuznets curve hypothesis in developing and transition economies: a literature survey. Environ Econ Policy Stud 22:585. https://doi.org/10.1007/s10018-020-00272-9
Puzzolo et al (2019) Supply considerations for scaling up clean cooking fuels for household energy in low- and middle-income countries. GeoHealth 3:370–390. https://doi.org/10.1029/2019GH000208
Rahman et al (2020) Evaluating the EKC hypothesis for the BCIM-EC member countries under the belt and road initiative. 12:1478. https://doi.org/10.3390/su12041478
Repetto (2001) The clean development mechanism: institutional breakthrough or institutional policy sciences. Policy Sci 34:303–327 https://www.jstor.org/stable/4532538
Ritchie H. & Roser M. (2018). CO2 and other greenhouse gas emissions. https://ourworldindata.org
Sadorsky P (2009) Renewable energy consumption, CO2 emissions and oil prices in the G7 countries. Energy Econ 31:456–462. https://doi.org/10.1016/j.eneco.2008.12.010
Saidi H, El Montasser G, Ajmi AN (2020) The role of institutions in the renewable energy-growth nexus in the MENA region: a panel cointegration approach. Environ Model Assess 25(2):259–276
Salim RA, Rafiq S (2012) Why do some emerging economies proactively accelerate the adoption of renewable energy? Energy Econ 34(4):1051–1057. https://doi.org/10.1016/j.eneco.2011.08.015
Salman et al (2019) The impact of institutional quality on economic growth and carbon emissions: evidence from Indonesia, South Korea and Thailand. J Clean Prod 241:118331. https://doi.org/10.1016/j.jclepro.2019.118331
Sarafidis V, Yamagata T, Robertson D (2009) A test of cross section dependence for a linear dynamic panel model with regressors. J Econ 148(2):149–161
Sarkodie & Adams (2018) Renewable energy, nuclear energy, and environmental pollution: accounting for political institutional quality in South Africa. Sci Total Environ 643:1590–1601. https://doi.org/10.1016/j.scitotenv.2018.06.320
Sarkodie SA, Adams S, Leirvik T (2020) Foreign direct investment and renewable energy in climate change mitigation: does governance matter? J Clean Prod:121262
Shahbaz et al (2012) Environmental Kuznets Curve hypothesis in Pakistan: cointegration and Granger causality. Renew Sust Energ Rev 16(5):2947–2953. https://doi.org/10.1016/j.rser.2012.02.015
Sinha A, Gupta M, Shahbaz M, Sengupta T (2019) Impact of corruption in public sector on environmental quality: implications for sustainability in BRICS and next 11 countries. J Clean Prod 232:1379–1393
Stern N and Fankhauser S (2016) Climate change, development, poverty and economics. In: The state of economics, the state of the world. MIT Press, Cambridge, MA
Sun et al (2019) Institutional quality, green innovation and energy efficiency. Energy Policy 135:111002. https://doi.org/10.1016/j.enpol.2019.111002
Tamazian, Rao (2010) Do economic, financial and institutional developments matter for environmental degradation? Evidence from Transitional Economies. Energy Econ 32:132–147. https://doi.org/10.1016/j.eneco.2009.04.004
Timilsina G, Dulal H (2009) A review of regulatory instruments to control environmental externalities from the transport sector. Eur Transp 41:80–112
Ulucak R, Danish KY (2020) An assessment of the environmental sustainability corridor: investigating the non-linear effects of environmental taxation on CO2 emissions. Sustain Dev 28:1–4. https://doi.org/10.1002/sd.2057
Vasylieva T, Lyulyov O, Bilan Y, Streimikiene D (2019) Sustainable economic development and greenhouse gas emissions: the dynamic impact of renewable energy consumption, GDP, and corruption. Energies 12(17):3289. https://doi.org/10.3390/en12173289
Wang Z, Danish ZB, Wang B (2018) The moderating role of corruption between economic growth and CO2 emissions: evidence from BRICS economies. Energy. 18:5442–5446. https://doi.org/10.1016/j.energy.2018.01.167
Wawrzyniak D, Doryn W (2020) Does the quality of institutions modify the economic growth-carbon dioxide emissions nexus? Evidence from a group of emerging and developing countries. Econ Res 33(1):124–144. https://doi.org/10.1080/1331677X.2019.1708770
Wong S, Bhattacharya K, Fuller JD (2010) Long-term effects of feed-in tariffs and carbon taxes on distribution systems. IEEE Trans Power Syst 25(3):1241–1253
Yao X, Yasmeen R, Padda IUH, Shah WUH, Kamal MA (2020) Inequalities by energy sources: an assessment of environmental quality. PLoS One 15(3):e0230503
Zhang M et al (2019) Do driving restrictions improve air quality: take Beijing-Tianjin for example? Sci Total Environ 712:136408. https://doi.org/10.1016/j.scitotenv.2019.136408
Acknowledgements
The authors are grateful to the editor, associate editor and anonymous referees of the journal for their extremely useful suggestions for the improvement of this paper. The usual disclaimers apply.
Author information
Authors and Affiliations
Contributions
All the authors contributed to the study conception and design. Material preparation, data collection and analysis were performed by, Anasuya Haldar and Narayan Sethi. The first draft of the manuscript was written by Anasuya Haldar, and Narayan Sethi commented on the previous versions of the manuscript. All authors read and approved the final manuscript.
Corresponding author
Ethics declarations
Conflict of interest
The authors declare that they have no conflict of interest..
Ethics approval and consent to participate
Not applicable.
Consent for publication
Not applicable.
Additional information
Responsible Editor: Eyup Dogan
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendix 1
Appendix 1
Rights and permissions
About this article
Cite this article
Haldar, A., Sethi, N. Effect of institutional quality and renewable energy consumption on CO2 emissions−an empirical investigation for developing countries. Environ Sci Pollut Res 28, 15485–15503 (2021). https://doi.org/10.1007/s11356-020-11532-2
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-020-11532-2