Harnessing the roles of renewable energy, high tech industries, and financial globalization for environmental sustainability: Evidence from newly industrialized economies

Abstract

Scholars and policy makers are paying close attention to reduce climate problems for sustainable growth. The failure to enhance ecological integrity could increase greenhouse gas emissions. Therefore, this study examines the effect of economic complexity, high-tech industries, renewables, natural resource abundance, and financial globalization on CO2 and ecological footprint for 10 selected newly industrializing countries for the period 1990 to 2018. We use Common Correlated Error Mean Group, Augmented Mean Group, panel causality, and Westerlund Error Correction Model of cointegration techniques that account for short-run, and long-run relationships across cross-sectionally dependent and heterogeneous countries. The findings reveal long-run interrelationships across the series of underlying observations. The long-run empirical results show the development of high-tech industries has statistically significant environmental welfare-enhancing impact, whereas renewables and natural resource exploitation mitigate environmental challenges. However, economic complexity and financial globalization increase emissions and ecological footprint (ECF). The results confirm unidirectional causality from renewable energy to CO2 and ECF and further from natural resources to CO2 and ECF. Additionally, there exists bidirectional causality between financial globalization and ECF. Based on these findings, we suggest that these countries should revise their energy policies in order to allocate more funds for the renewable energy technologies so that environmental problems can be mitigated. Along with renewable energy, further investments should be made in high-tech sector but economic complexity and financial globalization should be carefully handled.