The Influence of Industrial Output, Financial Development, and Renewable and Non-Renewable Energy on Environmental Degradation in Newly Industrialized Countries

Abstract

The prime objective of this study is to examine the impact of industrial output and financial development on carbon dioxide emissions for a panel of 10 newly industrialized countries, namely Brazil, China, India, Indonesia, Malaysia, Mexico, Philippines, South Africa, Thailand, and Turkey. The empirical analysis was conducted between 1982 and 2019 by employing various estimation tests and techniques. The different tests account for cross-sectional dependence in different series of the model. Therefore, the relevant panel unit root was conducted, and we found that all series become stationary after the first difference. The long run parameters were estimated, and we found that there is a significant long-run relationship between the industrial output, the financial development, and the carbon emissions. The carbon emissions are found to be significantly affected by both domestic income and industrial output, while being negatively affected by financial development. Industrial production coefficient estimates are highly elastic when compared to the other estimates. The results also indicate unidirectional short-run causality from the domestic output and trade openness to carbon emissions, urban population to domestic output, and financial development to industrial output. However, there is no evidence of bidirectional causality. The study concludes that sustainable economic growth can be achieved by using contemporary and efficient production techniques, using environmentally friendly inputs in industries, and increasing vigilance of both the public and private sectors. Both the public and private sectors should therefore be pushed to use more modern, eco-friendly, and productive processing techniques. It is recommended that both the public and commercial sectors be encouraged to embrace cutting-edge, environmentally friendly, and productive processing methods.