Determinants of greenhouse gas emanation in selected south Asian countries : panel data approach

Abstract

Environmental degradation has become a severe concern across South Asia; hence it is imperative to model the determinants of environmental quality across the region. Under such circumstances, the current study explores the dynamic effect of energy consumption, economic growth, and foreign direct investment on environmental degradation as measured by greenhouse gas emission in four selected South Asian countries namely Bangladesh, India, Pakistan, and Sri Lanka in the period 1972 to 2022, employing a panel data analysis approach. The study uses the Panel ARDL model utilizing a Pooled Mean Group. Mean Group and Dynamic Fixed Effect estimators, while first generation unit root confirms that the variables are stationary at the order I (0) and I (1), with none of integrated at I (2). Data were sourced from World Development Indicators. The study applies both the Environment Kuznets Curve Hypothesis and the Pollution Haven Hypothesis simultaneously. The findings reveal that the panel ARDL model with PMG estimator is the most appropriate, as determined by the Hausman test. Energy consumption and GDP exhibit a significant positive impact on greenhouse gas emanation in the short run. While in the long run, Energy consumption and FDI have a positive significant impact whereas GDP exerts a negative significant impact. The results validate both the Environmental Kuznets Curve and Pollution Haven Hypothesis for the panel of economies studied. Furthermore, based on these findings, several environmental welfare improvements relate policies are recommendations are suggested, including promoting green investment, monitor and regulate foreign direct investment, fostering sustainable economic growth, and encouraging economic diversification. In addition, consideration of sector specific impacts and exploring alternative economic indicators are encouraged for future research works.