A novel EKC perspective: do agricultural production, energy transition, and urban agglomeration achieve ecological sustainability?

Abstract

We aim to analyze the existence of a novel agricultural production-augmented environmental Kuznets curve (EKC-AP) theory for energy transition, urban agglomeration, and financial depth. To conduct this research, we use a global panel of selected 54 countries belonging to low, medium, and high levels of economic development from 1971 to 2017. Since our data are distributed into three development levels, it is highly likely to face cross-sectional dependence across the countries within and between the development levels, which may provide biased empirical results. To outpace such possibility, we employ advanced econometric strategies, which are robust to cross-sectional dependence and slope heterogeneity issues. We found that agricultural production, energy transition, urban agglomeration, financial depth, and ecological degradation experience a long-term cointegrating equilibrium association. We also confirm that exists an EKC-AP linkage of agricultural production with ecological degradation in highly developed economies, while those at the low and medium levels of development reveal a positive exponential and monotonic impact, respectively, of agricultural production on ecological degradation. The energy transition is found to promote ecological sustainability in developed countries through technique impact, while it deteriorates the ecological quality in countries at the medium development level. Moreover, urban agglomeration adversely impacts the ecological quality in the economies at low and medium development levels, whereas it improves the ecological sustainability in developed economies. Besides, financial depth proves harmful to ecological sustainability, with less subtle effects in developed economies. Based on our findings, for countries at low and medium levels of development, we propose advancing farming techniques using ecologically friendly technologies, promoting green energy transition, expanding the share of the services sector, and providing green financial systems to support green investment projects to achieve the Sustainable Development agenda of the United Nations.