Natural resources volatility, renewable energy, R&D resources and environment: Evidence from selected developed countries

Abstract

Natural resource abundance has long been one of the most resilient elements of output, having a contrary relationship with economic growth known as the resource curse. From the exploitation of natural resources through their eventual usage, developed counties have been facing a number of environmental concerns at various phases. Hence, limiting rising CO2 emissions due to resource exploitation is unavoidable. In this sense, fiscal decentralization and institutional quality can lessen the hostile effect of natural resource volatility on the environment through effective policies. Therefore, it is crucial to investigate other factors' role in the nexus between TNR and CO2 emissions. This endeavor explores the impact of natural resources volatility, fiscal decentralization, renewable energy (RE) R&D and institutional quality in affecting CO2 emissions for seven selected developed countries. This study broadens the scope of future research by establishing detailed environmental factors. Using CS-ARDL approach, we found a positive impact of income (GDP), total natural resources rent and a negative impact of fiscal decentralization, institutional quality and renewable energy R&D on CO2 emissions. Moreover, we found that fiscal decentralization and institutional quality affect CO2 emissions complementary to natural resource rent. This study suggests that countries could effectively adopt strategies aimed at improving environmental quality by improving governance and empowering the lower layer of government.