Non‐linear nexus of mineral rents, coal rents, foreign direct investment, and environmental sustainability: Importance of institutional quality in E‐7 nations

Abstract

AbstractThis study investigates the impact of natural resources (NRs), economic growth (GDP), institutional quality, mining and coal rents, and foreign direct investment (FDI) on the environmental quality in the E‐7 countries (Brazil, China, India, Indonesia, Russia, Turkey, and Mexico) from 1990 to 2021. To do this, such advanced estimation methods are used as the method of moments quantile regression (MMQR), with the artificial neural network utilized for robustness checks. The initial diagnostic test results unveiled the presence of cross‐sectional dependence, slope heterogeneity, and long‐run cointegration. The MMQR analysis results indicate that coal and mineral rents escalate environmental pollution by reducing the load capacity factor (LCF) across all quantiles. The results further indicate that FDI and economic growth negatively affect while institutional quality (INS) significantly promotes the LCF in E‐7 countries. Moreover, INS significantly moderates the relationship between mineral resources and LCF, as well as coal resources and LCF. The robustness test also validates these findings. Based on these results, policy measures aimed at strengthening institutional quality, particularly within the NR sector, are crucial for mitigating the adverse impacts of coal and mineral extraction on LCF and promoting sustainable development in the E‐7 countries.