Impact of Growth Factors on Greenhouse Gas Emissions in 12 Environmentally Vulnerable Countries: The Moderating Role of Governance

Abstract

The present study aims to identify a solution to environmental degradation, proxied by total greenhouse gas emissions. At first, this study examines the influence of growth measures, including GDP, domestic credit, and savings, on emissions, using energy use as a control variable. At the next step, it pulls out the variable that has the greatest impact on environmental contamination. Later, the high impact factor of environmental degradation is moderated by governance factors. This aims to help develop climate action strategies. The study employs panel data techniques and examines secondary data from twelve environmentally vulnerable countries from 1996 to 2020. Empirical results of the Panel Autoregressive Distributed Lag-PMG model show that GDP and savings positively influence emissions. The influence of domestic credit in this regard is negative. However, the control variable shows the least positive influence on greenhouse gas emissions than GDP and Savings. Since GDP influences more, the study moderates its influence with good governance factors. The study finds that good governance is a key solution, with regulatory quality, control of corruption, and the rule of law significantly weakening the main effect of GDP on greenhouse gas emissions. It is therefore recommended that strengthening the government’s operational structure in these public areas could be an effective climate action strategy for the examined countries.