Toward a sustainable environment: Nexus between economic growth, renewable energy use, forested area, and carbon emissions in Malaysia

Abstract

Global climate change caused by greenhouse gasses (GHGs), particularly carbon dioxide (CO2) emissions, poses incomparable threats to the environment, development, and sustainability. This research investigates the potential of economic growth, renewable energy use, and forested area toward achieving environmental sustainability in Malaysia by reducing CO2 emissions. Time series data from 1990 to 2019 were utilized by applying the Dynamic Ordinary Least Squares (DOLS) method. The empirical findings show that the coefficient of economic growth is positive and significant, indicating a 1% increase in economic growth is related to a 0.78% rise in CO2 emissions. In addition, the coefficient of renewable energy use is negative but not significant, suggesting that increasing renewable energy use by 1% is associated with CO2 emissions reduction by 0.10%. Finally, the coefficient of forested area is negative and significant, implying that increasing forested area by 1% is linked with a 3.86% reduction in CO2 emissions. The estimated results are robust to alternative estimators such as fully modified least squares (FMOLS) and canonical cointegrating regression (CCR). In addition, the pairwise Granger causality test was utilized to capture the causal relationship between the variables. The empirical outcomes reveal that economic growth deteriorates the environmental quality in Malaysia while enhanced renewable energy use and forested area can reduce Malaysia's carbon emissions. This study put forward policy recommendations for a low-carbon economy, promoting renewable energy, and sustainable forest management which could help to achieve environmental sustainability through emission reduction in Malaysia.