Modeling natural resources for ecological sustainability

Abstract

While natural resource consumption is critical for almost all production processes, the overdependence on and poor governance of those resources might result not only in natural resource depletion but also in ecological unsustainability. Against this background, the present research explores the novel perspective on how financial inclusivity moderates the effects of decentralized governance systems and natural resource reliance on ecological sustainability in the presence of research and development (R&D) expenditures. This research employs a novel method of moments quantile regression on data from eight selected OECD countries during 1995–2020. It is found that decentralized governance systems deteriorate ecological sustainability across all quantiles, with a more substantial impact for higher quantiles of ecological intensity. Natural resource reliance also hinders ecological sustainability, with the degree of effects decreasing from lower to higher quantiles of ecological intensity. Financial inclusion directly mitigates ecological unsustainability, manifesting a more powerful influence in ecologically more intensive countries. Concerning moderation, financial inclusivity negatively moderates the influence of decentralized governance systems and natural resource reliance on ecological intensity, showing stronger relationships in ecologically more intensive countries. Taking the other covariates into account, the EKC curve is uncovered to exist for all levels of ecological sustainability. Moreover, the labor force participation rate exerts ecological pressures, especially for countries with low ecological sustainability. Besides, R&D expenditures are negatively associated with ecological intensity and are responsible for the betterment of the OECD’s ecological sustainability. The baseline findings are robust to those of additional models employing ecological footprint as an alternative dependent variable. Findings implicate that subnational governments should promote (i) green microfinancing to resource-efficient investments, (ii) funding to small businesses extending sustainable business solutions, (iii) green finance thinking among the general public, and (iv) financing to localized sustainability projects.