Eco-Innovation and Fiscal Decentralisation: Pathways to Reducing CO2 Emissions in BRICS Economies

The mounting human activities, production of goods and services, and a growing global economic activity trend are responsible for ecological degradation. The present study is designed to elucidate the role of three important economic indicators: (i) natural resource rent, (ii) fiscal decentralisation, and (iii) economic innovation in reducing environmental degradation in BRICS economies by using the panel estimation techniques spanning the 1980 to 2018. The empirical findings infer that economic growth has an unfavourable and significant interconnection with CO₂ emission. Moreover, the study uncovered that eco-innovation is favourably linked with environmental quality. Our findings specify that natural resource rent is imperative for increasing CO₂ emissions in five selected countries. The analysis also favours the positive role of fiscal decentralisation in mitigating emanations. The empirical outcomes of Granger causality show uni-directional causality between fiscal decentralisation and CO₂ emission, eco-innovation and CO₂ emission, and GDP and CO₂ emission. The outcome implies that any policy interference regarding these variables can significantly influence environmental quality. In contrast, NRR has two-way Granger causality with CO₂ emission; this confirms that reverse causality between NRR and CO₂ emission exists.