Does institutional quality play a role in mitigating the impact of economic growth, population growth and renewable energy use on environmental sustainability in Asia?

Abstract

We examine the role of institutional quality in moderating the impact of economic growth, population growth, renewable energy consumption, and financial development on environmental sustainability in 30 selected Asian countries from 2002 to 2018. We apply the method of Moment Quantile Regression (MM-QR) to address fixed effects and endogeneity between economic growth, population, and financial development, while controlling trade and industrialization. Our results indicate that economic growth and population growth have a detrimental impact on environmental sustainability in Asian countries. Furthermore, we find that the consumption of renewable energy negatively affects environmental sustainability in all quantiles; this could be attributed to the relatively low use of renewable energy in Asia, which is 17%, on average. For validation, the results remain consistent after robustness checks. Our study validates the load capacity curve hypothesis (LCC) in Asian countries. By moderating the role of institutional quality on economic growth, renewable energy consumption, financial development, and population growth, we observe that all have a positive impact on improving environmental sustainability in Asia. The policy implications for policymakers are to consider institutional quality in order to reduce negative environmental impacts, promote renewable energy consumption, control the expansion of economic growth through environmental taxes, and strengthen institutional quality to improve environmental sustainability.