Greening the future: Do green growth and institutional quality affect environmental sustainability differently across countries' income levels? International evidence

Abstract

This study examines whether green growth and institutional quality index (i.e. anti-corruption, political stability, rule of law, voice and accountability, regulatory quality and government effectiveness) of selected 40 countries increase or reduce carbon dioxide (CO2) emissions from 2000 to 2021. For the analysis, the study divided the full panel sample of 40 countries into low-middle-income countries (17 countries) and high-upper-income countries (23 countries). The study utilizes the Method of Moment Quantile Regression (MM-QR) to address variables endogeneity. The results indicate three (3) main findings: i) For a full panel sample, green growth reduces CO2 emissions; ii) for the sub-sample analysis, green growth reduces CO2 emissions in low-middle-income countries but does not contribute to the reduction of CO2 emissions in high-upper-income countries; iii) for a full panel and sub-sample analysis, institutional quality increases CO2 emissions in low-middle and high-upper-income countries. Overall, the results suggest that green growth matters for future CO2 reduction. However, high-and upper-income countries have insufficiently decoupled their CO2 emissions from GDP growth. The study recommends that high-and upper-income countries should adopt green growth policies. The policy implications include strengthening institutional quality in high-upper and low-middle-income countries to improve environmental regulations, laws, and other related policies that minimize CO2 emissions to achieve environmental sustainability.