Do regulatory affairs, political stability, and renewable energy demand improve environmental quality? Perceptive from the South Asian Association for Regional Cooperation region

Abstract

The contemporary era confronts formidable obstacles, including environmental deterioration and energy consumption, which jeopardize the rapid advancement of the worldwide financial system. The hazards mentioned above encompass depletion of natural resources, eutrophication, and climatic catastrophes. Within this framework, the discourse surrounding strategic planning centers on institutional positioning and economic prospects, with the incorporation of alternative energy resources serving as a significant metric of economic advancement, as underscored by the COP26 objectives. This research examines the correlation between the quality of institutions and environmental quality, as measured by carbon emissions. A fixed effect regression methodology was utilized to estimate the relationship, utilizing panel data from the South Asian Association for Regional Cooperation economies covering the period from 1990 to 2021. The results show that if there is a 1% increase in the government regulatory quality and renewable energy, carbon emissions decrease by −0.102% and −1.125%, respectively, underscores institutions’ significance in advancing sustainable growth policies within the South Asian Association for Regional Cooperation region. Moreover, if there is a 1% increase in political instability, inbound foreign direct investment, and economic growth, carbon emissions increase by 0.199%, 0.042%, and 0.129%, respectively, suggesting the presence of rent-seeking conduct and pollution haven hypothesis, adversely affecting the ecological system. The study offers significant perspectives for policymakers who aim to foster sustainable regional development.