Impact of industrialization and non-renewable energy on environmental pollution in Australia: Do renewable energy and financial development play a mitigating role?

Abstract

Environmental pollution is a principal concern for all countries. In particular, the issue is alarming for Australia as the country has been suffering from various environmental disasters for some recent years. Therefore, examination the roles of some variables that are related to environment are vital. To this end, this work endeavors to ascertain the impacts of industrialization, non-renewable and renewable energy use, and financial development on environmental pollution in Australia. Using the data period of 1990–2020, a series of econometric techniques such as the Augmented Dickey-Fuller test, Phillips-Perron test, Autoregressive Distributive Lag (ARDL) bounds test and the pairwise Granger causality test are applied. The findings reveal that industrialization and non-renewable energy use increase while the square of industrialization, renewable energy use, and financial development reduces CO₂ emissions in Australia. The validation of the environmental Kuznets’ curve (EKC) hypothesis is also found. Bidirectional and unidirectional causal association of the studied variables with CO₂ emissions are attained. All the outcomes are theoretically and empirically relevant and have important policy implications.