Economic Prosperity at a Crossroads Examining the Dynamic Relationship between Carbon Emissions, Environmental Degradation, and Development Strategies
Abstract
detrimental effects on climate patterns and human endeavors. While numerous studies have delved into the factors influencing
CO2 emissions, the role of institutional quality remains an underexplored dimension. Our research seeks to enrich the existing
body of knowledge by scrutinizing the impact of financial development, institutional quality, foreign direct investment, trade
openness, urbanization, and renewable energy consumption on CO2 emissions from 1996 to 2020, employing dynamic
autoregressive distributed lag simulations. The empirical findings of our study illuminate a nuanced relationship. Governance
indicators, trade dynamics, financial development, and the adoption of renewable energy sources emerge as contributors to a
reduction in CO2 emissions. Conversely, urbanization and foreign direct investment are identified as factors exacerbating
environmental degradation. These outcomes underscore the imperative for governments to align environmental and economic
policies consistently for effective mitigation of environmental degradation and the pursuit of environmental sustainability.
Furthermore, our research emphasizes the pivotal role of financial institutions in steering countries towards low carbon
emissions and sustainable development. A focus on green growth, coupled with the promotion of clean production processes,
is paramount. Governments are urged to establish financial frameworks that facilitate the reduction of CO2 emissions,
fostering a synergy between economic prosperity and environmental well-being. In essence, our study advocates for a holistic
approach, urging nations to embrace environmentally conscious policies and robust financial strategies to achieve a
harmonious balance between economic advancement and ecological integrity.
Keywords
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DOI: https://doi.org/10.18686/pes.v5i4.2143
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