Impact of risk factors on the link between natural resources rents and carbon emissions: Evidence from economic, financial, and political risks

Abstract

Effective management of natural resources is crucial for diminishing carbon emissions. This research explores how economic, financial, and political risks influence the relationship between natural resources rents and carbon emissions. Analyzing data from 66 countries, this study utilizes methods such as quantile regression and dynamic threshold regression to thoroughly assess the data. The findings reveal: (i) Natural resources rents tend to increase carbon emissions consistently across different quantiles (0.1 to 0.9). The fact is confirmed by robustness checks, illustrating that increased natural resources rents lead to higher emissions. (ii) Economic, financial, and political risks affect how natural resources rents impact carbon emissions. Notably, reduced economic and financial risks lessen the propensity of natural resources rents to boost emissions at higher quantiles, while a decline in political risk decreases the exacerbating effect of natural resources rents on emissions from the 0.1 to 0.9 quantiles. (iii) This analysis uncovers threshold effects where economic, financial, and political risks act as threshold factors. Specifically, when economic and political risks are low, a rise in natural resources rents actually leads to a decline in carbon emissions. The findings underscore the importance of considering these risks in the formulation of policies aimed at reducing carbon emissions from natural resource exploitation.