Renewable Energy Consumption, Water Crises, and Environmental Degradation with Moderating Role of Governance: Dynamic Panel Analysis under Cross-Sectional Dependence

Shazia Kousar,Nimra Ashraf,Farhan Ahmed,María de las Nieves López García

doi:10.3390/su122410308

Abstract

This study aims to investigate the relationship between renewable energy consumption, water availability, and environmental degradation with the moderating effect of governance in the South Asian region. This study collected data for renewable energy, water availability, governance, and environmental degradation for the period of 1988 to 2018 from the World Development Indicator. In panel data estimation, if cross-sectional dependence exists, it produces biased estimates. Therefore, this study applied a newly developed technique, dynamic common correlated effect, which produces efficient estimates in the presence of cross-sectional dependence. This study found that foreign direct investment positively and significantly increases environment degradation (β = 0.69 *, * indicates the significance level at less than 1%) while renewable energy and water availability cause to reduce environment degradation (β = −0.08 **, β = −0.09 **, **indicates the significance level at less than 5%). Moreover, the study also found that governance significantly strengthens the relationship of renewable energy and water availability with environment degradation (β = 0.37 **, β = 0.24 **) while governance significantly weakens the relationship of foreign direct investment and environmental degradation (β = −0.34 *). The study suggests that South Asian countries should improve political institutions, and promote renewable energy, water availability, and clean production to improve the environment quality.

Highlights

During the last decade, researchers have shown considerable interest to explore the causes of climate change
Hitamand and Borhan [56] investigated the association between foreign direct investment (FDI) and environment quality in Malaysia from 1965 to 2010 and the study found that environmental degradation was positively affected by the FDI
The study empirically analyzes the association of renewable energy, water resources, and FDI on environment degradation in the South Asia region (India, Nepal, Pakistan, Bangladesh, and Sri-Lanka)

Summary

Introduction

Researchers have shown considerable interest to explore the causes of climate change. There is a need to re-examine the FDI–environment nexus Water is another important factor that significantly contributes to environmental quality, as overexploitation of water resources causes environmental degradation while sustainable withdrawal causes balance in the environment. Governance is one of the most prominent factors that positively contributes to the relationship between renewable energy, FDI, water availability, and environmental degradation [22]. No study so far has been conducted, in the context of the South Asian nation, which has investigated the moderating impact of institutional quality on the relationship between renewable energy, FDI, water availability, and environmental quality. The present study is an attempt to extend the existing literature by investigating the moderating role of institutional quality on the association between renewable energy, FDI, water availability, and CO2 emission and help the policymakers to develop the policies to control environmental degradation

Literature Review

Data and Methodology

Results and Discussion

Preliminary Findings

Long Run Empirics

Conclusions and Implications