Evaluating the Scandinavian economy's transition to a sustainable environment. Fresh evidence from newly developed CS-ARDL approach

Abstract

Scandinavian economies have yet to contribute to low-carbon sustainable development. This study analyzes the short-term and long-term effects of economic growth, sustainable energy, natural resources, technological innovation, and financial development on the sustainable environment in Scandinavian economies from 1990 to 2021. This research holds significance as it represents the initial attempt to examine the interconnections between these variables within this specific framework. The “Westerlund cointegration” confirms the long-run relationship among variables by proving a cross-section reliance in panel data. We employed the “Cross-sectional autoregressive distributive lag (CSARDL),” which corroborates that total natural resources have positive long-run and short-run effects on CO2 emissions. Economic growth has a positive short-run effect on CO2 emissions. At the same time, economic growth square, sustainable energy and technological innovation have negative short-run and long-run effects on carbon emissions. However, Financial development has no effect on CO2. The study suggests that Scandinavian economies develop policies to increase sustainable energy production by improving green technologies.