Validating the Environmental Kuznets Curve: Evidence from ASEAN’s Economic Growth, Renewable Energy, and Carbon Emissions

Abstract

This study investigates the nexus between economic growth, foreign direct investment (FDI), technological advancement, household consumption, and greenhouse gas emissions (GHG) among ASEAN countries. The Environmental Kuznets Curve (EKC) hypothesis suggests an inverted U-shaped relationship between environmental degradation and economic development, signifying that pollution levels primarily increase with economic growth but decline after reaching a turning point. Employing panel data spanning from 1990 to 2022 for seven ASEAN countries including Cambodia, Brunei, Malaysia, Indonesia, Thailand, Philippines and Vietnam, this study uses Pooled Mean Group (PMG) analysis to scrutinise the short-run and long-run relationships among the variables. The findings provide support for the validity of the EKC hypothesis in the ASEAN region, signalling the existence of an inverted U-shaped relationship between economic growth and GHG. In the short run, FDI and economic growth were found to increase emissions, while in the long run, growth in technological advancements and gross production were correlated with a reduction in GHG. The findings offer significant insights particularly for policymakers among ASEAN countries to formulate effective strategies that balance technological advancement, FDI attraction economic growth and environmental sustainability, while also emphasising the importance of promoting sustainable consumption patterns.