Beyond the environmental Kuznets Curve in E7 economies: Accounting for the combined impacts of institutional quality and renewables

Abstract

This study explores the applicability of conventional environmental Kuznets curve (EKC) with an extension for the case of emerging industrialized economies, comprised of China, India, Brazil, Mexico, Russia, Indonesia, and Turkey, for annual time frequency from 1995 to 2016. This study is distinct from that already documented in the extant literature by extending the traditional EKC phenomenon by accounting for the combined impact of institutional quality and renewables in E7 blocs. The countries under review are known to be emerging and still at their scale stage of their growth path. As such, the need to explore the theme is pertinent for stakeholders. Empirical framework is built on second-generational panel econometrics strategies that consist of Augmented Mean Group, Common Correlated Effects Mean Group estimator, Driscoll-Kraay and Dumitrescu and Hurlin Causality analysis, which is superior to first-generation methods. Our study validates the EKC phenomenon in E7, i.e., where emphasis is placed on economic expansion relative to the quality of the environment. The EKC phenomenon is validated by the deteriorating effect of fossil-fuel energy consumption in the bloc. However, renewables are seen as a panacea to reduce pollution emission as renewable energy exerts a negative and statistical relationship with CO2 emission over the sampled period. Additional results show that weak institution also dampens the quality of the environment in E7. These outcomes are suggestive to policy makers to reinforce their commitment to the quality of the environment in terms of growth and energy transition from fossil fuel to clean energy sources. Further policy prescriptions are presented in the concluding section.