Nexus among natural resources, environmental sustainability, and political risk: Testing the load capacity factor curve hypothesis

Abstract

Establishing sustainable environmental practices continues to pose a significant obstacle for emerging countries within the ASEAN region. In this regard, identifying the pivotal factors propelling this advancement is of utmost importance. Moreover, although various studies have investigated the applicability of the environmental Kuznets curve using different metrics of environmental deterioration, such as CO2 emissions and ecological footprint, a comprehensive evaluation of the load capacity factor curve (LCC) hypothesis remains notably absent. As a result, this study undertakes an examination of the role of natural resources, biomass utilization, and political risk on the load capacity factor within the framework of the LCC hypothesis. This study employed the ADRL estimators to analyse the data between 1984 and 2018. The result from the ARDL estimator highlights that natural resources, political risk and urbanization mitigates LCF, while biomass increases LCF. Moreover, the study validates the LCC hypothesis. Furthermore, the frequency domain causality method is applied and evidence indicates a causal relationship between LCF and the explanatory variables, with the exception of urbanization.