From Complexity to Sustainability: The Environmental Regulation Puzzle in Emerging Economies

This study investigates the impact of economic complexity (ECI) and environmental regulation (ENR) on the ecological footprint (EFP) in BRICST economies over the period 1995–2023. By employing Method of Moments Quantile Regression (MMQR) and Bootstrap Quantile Regression (BSQR), the research captures the heterogeneous effects of macroeconomic and institutional variables across different levels of environmental degradation. The findings reveal that economic complexity significantly increases the ecological footprint, especially in lower and middle quantiles, suggesting a structural reliance on carbon‐intensive production. However, the interaction term (ECI × ENR) shows that stringent environmental regulation moderates this adverse effect, indicating that regulatory strength can align complexity with sustainability. Environmental regulation alone consistently exhibits a negative and significant impact on EFP across all models and quantiles, highlighting its role as a key mitigator of ecological degradation. Furthermore, GDP positively correlates with EFP, supporting the Environmental Kuznets Curve hypothesis in its early phase. Foreign direct investment and urbanization show varied but generally favorable effects, suggesting their potential in improving environmental efficiency. Trade openness has a small yet consistent positive effect, reinforcing the pollution haven concern. Overall, the study emphasizes the importance of institutional quality and regulatory frameworks in managing the environmental challenges posed by industrial and economic complexity in emerging economies.