Natural resources rent and climate vulnerability: An inverted U-shaped relationship moderated by productive capacity, trade openness, and urbanization in resource-abundant countries

Abstract

Natural resources play a pivotal role in the global economy, with numerous nations leveraging their extraction, utilization, and exportation as primary drivers for economic advancement. Nonetheless, an overreliance on these resources can expose countries to the adverse effects of climate change, including droughts, floods, and other extreme climatic events, thereby jeopardizing production and revenue streams. Paradoxically, the revenues derived from natural resource extraction can be channeled towards initiatives aimed at climate change mitigation and adaptation, underscoring the intricate interplay between natural resources and climate vulnerability. This research endeavors to elucidate the inverted U-shaped relationship between total natural resources rent and climate vulnerability. The study encompasses nineteen resource-rich countries over the period 2000–2021. Employing the panel quantile ARDL (Auto-Regressive Distributed Lag) methodology with a dynamic fixed effect specification, we delve into the moderating influence of overall productive capacity, trade openness and urbanization on the nexus between resource extraction and climate vulnerability. The panel QARDL estimations are segmented into the 25th, 50th, and 75th quantiles for both long-term and short-term outcomes. In the long-term perspective, our findings validate an inverted U-shaped association between total natural resources rent and climate vulnerability. Factors such as urbanization and trade openness exhibit a positive correlation with climate vulnerability, whereas economic growth demonstrates an inverse relationship. Significantly, the study reveals that productive capacity, when acting as a moderator for natural resources rent, holds the potential to attenuate climate vulnerability.