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Is higher economic growth possible through better institutional quality and a lower carbon footprint? Evidence from developing countries

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  • Nair, Mahendhiran
  • Arvin, Mak B.
  • Pradhan, Rudra P.
  • Bahmani, Sahar

Abstract

Mounting scientific evidence shows that CO2 emissions have been a primary cause of climate change, which has harmed the quality of human life and economic development. To reduce the carbon footprint, many developed economies have undertaken various institutional reforms to transition their economies to clean energy sources that are compatible with sound economic growth. The picture is different for many developing countries whose economic development in the past has been dependent on fossil fuels or hydrocarbon energy sources, which have affected their climate adversely. The impact of the quality of the latter countries’ institutions on both climate change and economic growth simultaneously has been under-studied. To address this literature gap, this paper examines the links between institutional quality, CO2 emission, and economic growth in developing countries. Using the Granger Causality test, the study reveals that there is strong interdependence among the variables. Hence, policymakers in these countries should implement holistic co-development policy frameworks that strengthen the institutions of governance as well as adopting clean-energy industrial strategies that minimize CO2 emissions. Such policies positively impact economic growth in these countries.

Suggested Citation

  • Nair, Mahendhiran & Arvin, Mak B. & Pradhan, Rudra P. & Bahmani, Sahar, 2021. "Is higher economic growth possible through better institutional quality and a lower carbon footprint? Evidence from developing countries," Renewable Energy, Elsevier, vol. 167(C), pages 132-145.
    • Handle: RePEc:eee:renene:v:167:y:2021:i:c:p:132-145
    DOI: 10.1016/j.renene.2020.11.056
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    More about this item

    Keywords

    CO2 emission; Institutional quality and environmental regulation; Economic growth; Developing countries;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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