Contribution of hydro energy production, economic complexity and technological innovation in achieving an environmentally sustainable Asia

The impact of hydro energy production, economic complexity, urbanization, technological innovation and financial development on environmental sustainability between 1995 and 2017 is examined for a panel of thirteen Asian economies using two environmental proxies— their ecological footprint and CO₂ emissions. The non-parametric Driscoll-Kraay standard error method and the Dumitrescu-Hurlin panel causality test are applied to the data. Our findings show that hydro energy production and technological innovation have a significant negative impact on the environment, thus promoting environmental sustainability. Economic complexity significantly lowers environmental sustainability while the non-linear effect of economic complexity favors environmental sustainability; this confirms the existence of an economic-complexity-based inverted-U-shaped environmental Kuznets curve hypothesis. Moreover, urbanization and financial development significantly decrease environmental sustainability. The results of our study confirm the feedback causality between hydro energy production and carbon dioxide emissions. We recommend expansionary policies regarding hydro energy production that are beneficial for substituting fossil fuel energy. This paves a path towards environmental sustainability in this era of global boiling.