Are Natural Resource Rents and Renewable Energy Consumption Solutions for Environmental Degradation? Fresh Insights from a Modified Ecological Footprint Model

Abstract

A comprehensive approach addressing the key factors exacerbating pressure on the environment is required to minimize the damages caused by global warming and environmental destruction. For this purpose, the present study investigates the effects of renewable energy consumption (REC) and natural resource rents (NRRs) on environmental degradation within the scope of the environmental Kuznets curve (EKC) hypothesis for ASEAN-5 countries. Differing from most previous studies, this research represents environmental degradation by using the ecological footprint pressure index, which considers both the supply and demand aspects of the environment. The present study covers the period between 1990 and 2018. This study employs the Method of Moments Quantile Regression (MMQR), an advanced panel technique that yields reliable results on the outlier issue, endogeneity, and non-normal distribution. The MMQR results confirm the EKC hypothesis, assuming the presence of an inverted U-shaped relationship between economic growth and environmental degradation. Moreover, the results reveal that REC and NRRs reduce environmental degradation in all quantiles. Given these results, policymakers in the ASEAN-5 countries are recommended to utilize productivity gains from natural resource rents for investment in clean energy and to shift their energy consumption policies towards renewable energy technologies and research.