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The effects of research and development and financial development on CO2 emissions: evidence from selected WAME economies

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Earth is in the Anthropocene era and humankind deteriorates the global environment; thus, there is a dire need for sustainable policies at all levels. This study investigates the causal and long-run association between financial development, research and development expenditures, and carbon dioxide emission including energy intensity and income level for selected West Asia and Middle East (WAME) economies along the belt and road. The long-run panel estimation findings reveal that the research and development expenditures (R&D) are negatively associated with environmental degradation, as they significantly mitigate carbon emissions. In contrast, financial development contributes to environmental degradation. The findings validated the environmental Kuznets curve (EKC) phenomenon for the WAME economies considering R&D and financial development. Further, energy intensity exacerbates environmental quality. Additionally, the findings from Dumitrescu-Hurlin (DH) causal approach reveal bidirectional causal associations between financial development and carbon emissions and between R&D and emissions. The findings have implications for policy and practice to attain environmental sustainability in the selected WAME countries.
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RESEARCH ARTICLE
The effects of research and development and financial development
on CO
2
emissions: evidence from selected WAME economies
Shauku Kihombo
1
&Shah Saud
1,2
&Zahoor Ahmed
1
&Songsheng Chen
1
Received: 5 December 2020 /Accepted: 3 May 2021
#The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021
Abstract
Earth is in the Anthropocene era and humankind deteriorates the global environment; thus, there is a dire need for sustainable
policies at all levels. This study investigates the causal and long-run association between financial development, research and
development expenditures, and carbon dioxide emission including energy intensity and income level for selected West Asia and
Middle East (WAME) economies along the belt and road. The long-run panel estimation findings reveal that the research and
development expenditures (R&D) are negatively associated with environmental degradation, as they significantly mitigate
carbon emissions. In contrast, financial development contributes to environmental degradation. The findings validated the
environmental Kuznets curve (EKC) phenomenon for the WAME economies considering R&D and financial development.
Further, energy intensity exacerbates environmental quality. Additionally, the findings from Dumitrescu-Hurlin (DH) causal
approach reveal bidirectional causal associations between financial development and carbon emissions and between R&D and
emissions. The findings have implications for policy and practice to attain environmental sustainability in the selected WAME
countries.
Keywords Financial development .Research & Development .Energy intensity .DSUR .Belt & Road
Introduction
Over the past few decades, climate change associated with an
enormous increase in greenhouse gas (GHG) emissions has
become the focus of environmental studies (Ahmed et al.
2019a,2021a). CO
2
emissions are among the foremost causes
of global warming and climate change due totheir major share
in greenhouse gases. According to IEA, CO
2
emissions from
energy consumption constitute over 58% of global emissions.
Economic development experienced by the economies around
the world has sparked energy demand and energy supply has
increased by approximately 150% from 1971 to 2015 (IEA
2017). Indeed, energy consumption is vital for every
economys economic development; however, overwhelming
dependence on fossil energy sources leads to more emissions
and environmental degradation.
Concerning the intergeneration equity theory, it is a moral
obligation of economies to preserve and sustain the environ-
ment for future generations (Hunt and Fund 2016). The pres-
ervation of the planet from global environmental crises
grabbed world attention, and finally, the key objectives of
international efforts are taken by world economies in the form
of UNFCC
1
(Marrakesh Accords (COP7)
2
, Kyoto Protocol
(COP3)
3
, Paris agreement (COP21), Bali Road Map
1
See for more detail: UN Framework Convention on Climate Change https://
unfccc.int/process/the-convention/what-is-the-united-nations-framework-
convention-on-climate-change
2
See for more detail: Marrakesh Accords (COP7) https://unfccc.int/lulucf-
developments-past-cop-and-sb-sessions-0
3
See for more detail: Kyoto Protocol (COP3) https://unfccc.int/essential_
background/kyoto_protocol/items/6034.php
Responsible Editor: Ilhan Ozturk
*Shah Saud
saud_chawoo@bit.edu.cn; saud_mrd@yahoo.com
*Songsheng Chen
chenss@bit.edu.cn
Shauku Kihombo
skihombo@gmail.com
Zahoor Ahmed
zahoorahmed83@yahoo.com
1
School of Management and Economics, Beijing Institute of
Technology, South-Zhongguancun Street, Beijing 100081, Peoples
Republic of China
2
Institute of Business Studies, Kohat University of Science &
Technology, Kohat, Kyber Pakhtunkhwa 26000, Pakistan
https://doi.org/10.1007/s11356-021-14288-5
/ Published online: 11 May 2021
Environmental Science and Pollution Research (2021) 28:51149–51159
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... R&D is an essential element in achieving the possible EKC turning point since it stimulates clean technology, which promotes the reduction of CO2 emissions (Koçak and Ulucak 2019). Kihombo et al. (2021) indicated an increase in R&D hoards the introduction of new cuttingedge technology that improves environmental sustainability in a region. While Kihombo et al. (2021) pointed out that the utmost objective of innovation is not the environment, it is therefore appropriate to strengthen the spillover effect and reduce the echo effect of knowledge on reducing carbon emissions. ...
... Kihombo et al. (2021) indicated an increase in R&D hoards the introduction of new cuttingedge technology that improves environmental sustainability in a region. While Kihombo et al. (2021) pointed out that the utmost objective of innovation is not the environment, it is therefore appropriate to strengthen the spillover effect and reduce the echo effect of knowledge on reducing carbon emissions. Aggregate R&D has proven to have a negative relationship with CO2 emissions. ...
... The correlation between R&D and carbon emission in the east indicates efficiency in energy consumption and high sensitivity of carbon emission reduction, beyond the fact that the priority objective of innovation is not the environment (Kihombo et al. 2021). The net results of the direct and indirect effect of R&D manifested, and it is, therefore, necessary to reinforce the spillover effect and reduce the rebound effect of knowledge on reducing carbon emission. ...
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... The Sustainable Development Goals (SDG) agenda of the United Nations calls for adoption of proactive measures by the global economies, irrespective of their development statuses, for promoting socioeconomic well-being while emphasizing the need for environmental protection (Ahmed et al. 2021;Sinha et al. 2020;Zhao et al. 2022). Accordingly, the United Nations has put forward 17 comprehensive goals that guide the world economies in simultaneously securing economic expansion (Ahmed et al. 2022), enhancing social welfare (Ashurov et al. 2022), and improving environmental conditions (Tillaguango et al. 2021). ...
... Meanwhile, in the context of selected members of the European Union,Park et al. (2018) claimed that a surge in the level of CO2 emissions does not causally influence the level of financial development in those countries. In contrast,Kihombo et al. (2021) concluded that higher CO2 emissions causally influence the level of financial development in selected countries located in West Asia and the Middle East. Nevertheless, bothPark et al. (2018) andKihombo et al. (2021) documented evidence of financial development causally influencing the CO2 emission figures of the respective nations of concern. ...
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... Researchers (e.g. Dong et al., 2020;Akram et al., 2020;Anser et al., 2020a;Haldar and Sethi, 2021;Altinoz and Dogan, 2021;Hasanov et al., 2021;and Radmehr et al., 2021;Saidi and Omri, 2020) have studied the mitigating power of renewable energy consumption on carbon emissions, while others (i.e., Alam et al., 2021;Petrović and Lobanov, 2020;Paramati et al., 2020;Mo, 2021;Kihombo et al., 2021;Huang et al., 2021a;Lin and Zhu, 2019;Yu and Du, 2019;Bai et al., 2020;Khan et al., 2020b, andLiu et al., 2021) have considered technology in fostering good environmental prospects. ...
... Erdogan et al. (2020) G20 countries for the period 1991-2017, Paramati et al. (2020) 25 European Union (EU) member countries for 1998-2014, Alam et al. (2021) for the period 1996-2013, Petrović and Lobanov (2020) for the period 1981-2014 examined OECD countries and found an inverse relationship between technological innovation and carbon emissions. This result was recently reported by Huang et al. (2021a), Mo (2021), and Kihombo et al. (2021) for different countries and country groups. Analyzing China, where technological innovation will lead to a reduction in CO 2 emissions, although the country and research method may change, Lin Institutions in a country can play an active role in ensuring economic development and sustainability. ...
... Our finding supports the findings from Paramati et al. (2020) for 25 European Union (EU) member countries, Alam et al. (2021), Petrović and Lobanov (2020) for OECD countries who found inverse relationship between technological innovation and carbon emissions. This result was recently reported by Huang et al. (2021a), Mo (2021), and Kihombo et al. (2021) for different countries and country groups. Also for China, Lin and Zhu (2019), Yu and Du (2019), Zhang et al. (2020), Bai et al. (2020), Khan et al. (2020b) and Liu et al. (2021) found technological innovation reducing CO 2 emissions. ...
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... In addition, other economic factors are also proven to have a significant impact on carbon dioxide emissions and environmental sustainability, including urbanization [28,29], financial development [30,31], foreign direct investment [32,33], trade [34,35], renewable energy consumption [36,37], and so on. In recent years, there has been a growing awareness of noneconomic factors on environmental sustainability, including environmental regulation [38,39], climate factors [40], research and development level [41], innovation factors [42,43], and technological progress [44,45]. ...
... Research and development level (Rdl): The research and development expenditure as a share of GDP is adopted to measure R&D level. The increase in R&D spending can enhance energy efficiency and energy transition, which is critically important for curbing energy use-related carbon emissions [41]. ...
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In recent decades, information and communication technology (ICT) has revolutionized the world affecting every aspect of life, including education, business, social activities, and environment. Consequently, the studies linking ICT and environmental sustainability are growing owing to its positive and adverse effects on environmental sustainability, and the noticeable disagreement in literature. Therefore, current work examines the criticality of ICT, human capital (education and return on education), and globalization in environmental sustainability, controlling urbanization and economic growth in the Latin American and Caribbean (LCA) region, where economic growth and globalization have substantially increased over the past three decades. Reliable panel econometric techniques, including second-generation unit root tests, Westerlund (2007, 2008) cointegration tests, and continuously-updated fully modified (CUP-BC) and continuously-updated bias-corrected (CUP-FM) long-run estimators are employed on the data for the period 1995-2017. The empirical estimations unfold that ICT (computed by a four components ICT index) and globalization contribute to reduce CO2 emissions. On the dark side, economic growth and urbanization degrade environment. Surprisingly, human capital adds to environmental degradation. The panel causality results reveal that ICT and globalization Granger cause CO2 emissions. These unique findings provide new insight to alleviate environmental degradation in the LCA region. Based on these outcomes, a comprehensive set of policies are directed for environmental sustainability.
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Over the past few years, a growing number of scholars employed ecological footprint (EP) as a proxy of environmental deterioration because this comprehensive indicator effectively captures environmental degradation. However, the literature on driving factors of the ecological footprint indicates diverse findings, and the majority of the studies explore symmetric relationships. Taking this in view, the current study uses both symmetric and asymmetric methods to examine the nexus between ecological footprint, economic globalization, economic growth, and financial development, controlling for population density and energy consumption in the third largest economy Japan. The study uses advanced unit root methods including the Narayan-Popp and CMR unit root tests with two breaks to determine unit root properties. The asymmetric and symmetric ARDL methods are used to probe cointegration and long-run associations. The findings reveal the long-run asymmetric and symmetric relationship of variables with the ecological footprint. The long-run empirical results of symmetric ARDL suggest that economic globalization and financial development increase footprint in Japan. On the flipside, the novel findings from the asymmetric ARDL indicate that positive and negative changes in economic globalization reduce footprint. Interestingly, the asymmetric ARDL presents a totally different picture, indicating that the results of symmetric ARDL can be unreliable in the presence of asymmetries. A positive change in financial development increases footprint with a more pronounced effect in the long-run, compared to a negative change which has a comparatively weak effect. Energy consumption deteriorates the environment by increasing the ecological footprint. On the positive side, population density decreases footprint, and the inverted U-shaped relationship between footprint and income confirms the validity of the EKC in Japan. Finally, the policy implications of these novel findings are discussed.