Analysis of the environmental impacts of the agricultural, industrial, and financial sectors in Malaysia

Abstract

The mounting level of environmental degradation in Malaysia constitutes a grave issue to analysts and policymakers because it has adverse impact on climate change and human lives. This study is motivated by the dearth of a comprehensive research on the environmental impact of sectoral growth. It focuses on sectoral growth because of the need to strike a balance between the economic and environmental impacts of the agricultural, industrial, and financial sectors in Malaysia. Therefore, this study analyses the environmental impacts of the agricultural, industrial, and financial sectors in Malaysia during 1980–2018. It uses ecological footprint and carbon emissions as indicators of environmental degradation to properly capture various aspects of environmental degradation. It employs the Environmental Kuznets Curve (EKC) model and Autoregressive Distributed Lag (ARDL) procedure. This study contributes to the extant literature by showing that the agricultural, industrial, and market-based financial sectors aggravate carbon emissions while the bank-based financial sector mitigates carbon emissions in Malaysia. However, the impacts of the agricultural, industrial, and financial sectors on ecological footprint are tenuous. Though the EKC hypothesis is verified, energy consumption worsens ecological footprint and carbon emissions. The findings are robust to structural breaks and satisfactory diagnostic tests. This study implies that the agricultural, industrial, and financial sectors are significant determinants of carbon emissions. Since Malaysia cannot afford to sacrifice sectoral development for environmental sustainability, it is necessary for stakeholders to embrace environmental-friendly techniques that can boost sectoral development without compromising environmental quality.