Modelling coal rent, economic growth and CO2 emissions: Does regulatory quality matter in BRICS economies?

Abstract

Global warming issues have been on the front burner of most economies and Brazil, Russia, India, China and South Africa countries (BRICS) are no exception. The region has joined the rest of the world on the global strides to mitigate against global warming in terms of decoupling carbon dioxide emissions from economic growth. This is the motivation for the present study to consider the interaction between economic growth, pollutant emissions, coal rent while accounting for the role of other covariates like regulatory quality. The study is conducted in a balanced panel setting over annual frequency data from 1990 to 2014. To this end, Pooled mean group with dynamic autoregressive distributed lag [PMG-ARDL (1,1,1,1,1)] was conducted to explore the coal-rents-energy nexus. The empirical study shows that for BRICS countries, unlike coal consumption, coal rents have a significant but negative impact on CO2 emissions. Also, in contrast to expectation, regulations on coal rents in the form of carbon damage costs have a significant but positive impact on CO2 emissions. This suggests that in line with the drive for growth by BRICS countries, and to achieve a reduction in the levels of CO2 emissions for green growth and sustainable development, more stringent environmental-energy-related regulations are inevitable. Thus, for policymakers, it is vital to reinforce the use of stringent regulations as these economies open up to more use of coal energy. However, the need to shift, the energy mix in BRICS to renewables is pertinent in a time of global environmental consciousness for cleaner energy sources and environmentally friendly ecosystem.