The dynamics of natural resources, renewable energy, and financial development on achieving ecological sustainability

Abstract

Environmental sustainability has emerged as a paramount concern on the global agenda. Following the Paris Agreement and COP26, a strong global commitment exists to reducing its environmental footprint. This study examines the impact of non-renewable energy consumption and economic growth on ecological integrity from 1980 to 2021 b y employing the Autoregressive Distributed Lag (ARDL), Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) methodologies. Causality tests were also performed to understand the interrelationships among the variables, complemented by various pre-estimation tests to address potential data structure limitations. The findings highlight a dual impact on ecological integrity. While economic growth and the consumption of fossil fuels significantly worsen ecological degradation, the presence of natural resources benefits environmental quality. Intriguingly, it was revealed that both financial development and renewable energy consumption do not notably influence carbon dioxide emissions. This result is further validated by Granger causality tests, which align with the conclusions derived from the ARDL outcomes. Based on these detailed results, the study proposes targeted policy recommendations for Indonesia to encourage sustainable development practices that mitigate adverse environmental impacts while leveraging the positive contributions of natural resources .This study also serves as a valuable reference for other developing countries, such as China, in balancing the relationship between environmental sustainability and economic development.