How are urbanization, energy consumption and globalization influencing the environmental quality of the G-7?

Abstract

Many developed countries including G-7 became part of the Kyoto Protocol for improving their environmental quality in 2005. Its main goals were to develop national-level programs for energy conservation and the eradication of greenhouse gas emissions. To achieve such goals, certain policy measures including reduction in deforestation, urban population and promotion of renewable energy consumption were adopted. This study aims to examine the consequences of these policies on the environmental quality of G-7 from 1988 to 2018. LLC and IPS unit root tests were applied to check the stationarity of analyzed variables. The results of Pedroni and Kao's co-integration tests proved the long-run relationship between the dependent and explanatory variables. The application of multiple cross-sectional dependence tests revealed that the cross-sections are independent of each other. The findings of the panel Autoregressive distributed lag (ARDL) model exhibited that urbanization, economic growth and nonrenewable energy consumption are hampering the environmental quality. While renewable energy consumption and globalization are improving it in the long term. Urbanization, renewable and nonrenewable energy consumption significantly improve the environmental quality during the short term whereas globalization insignificantly deteriorates the environment. The study confirms the presence of reversed U environmental Kuznets curve between urbanization and carbon emissions with a turning point at 80 per cent of urbanization. The study suggests that the transformation of energy consumption from nonrenewable to renewable sources and strict compliance with environment management policies will prove prolific for improving the environmental quality of G-7.