Do economic policy uncertainty and geopolitical risk surge CO2 emissions? New insights from panel quantile regression approach.

Abstract

In recent times, economic policy uncertainty (EPU) and geopolitical risk (GPR) are increasing significantly where the economy and environment are affected by these factors. Therefore, the goal of this paper is to investigate whether EPU and GPR impede CO2 emissions in BRICST countries. We employ second-generation panel data methods, AMG and CCEMG estimator, and panel quantile regression model. The conclusions document that most of the variables are integrated at I (1), and there exists co-integration among considered variables of the study. Moreover, we note that EPU and GPR have a heterogeneous effect on CO2 emissions across different quantiles. EPU adversely affects CO2 emissions at lower and middle quantiles, while it surges the CO2 emissions at higher quantiles. On the contrary, geopolitical risk surges CO2 emissions at lower quartiles, and it plunges CO2 emissions at middle and higher quantiles. Furthermore, GDP per capita, renewable energy, non-renewable energy, and urbanization also have a heterogeneous impact on CO2 emissions in the conditional distribution of CO2 emissions. Based on the results, we discuss the policy direction.