Can energy productivity gains harness the carbon dioxide-inhibiting agenda of the Next 11 countries? Implications for achieving sustainable development

The Next 11 countries are among the world's most rapidy emerging economies that are poised to becoming key drivers of the global economy. Nonetheless, despite progressing economically, these nations have experienced persistent deterioration in their environmental conditions. Hence, this study specifically investigates whether energy productivity gains, controlling for financial inclusion, renewable energy use, economic growth, international trade, and urbanization, can harness the carbon dioxide emissions (CO2E)-inhibiting objectives of the Next 11 countries. The empirical analysis, using annual data spanning from 2004 to 2020, involves the application of advanced econometric tools that are robust to handling the cross-sectional dependency and slope heterogeneity-related issues. The results from the econometric analysis indicate that although energy productivity gains and greater renewable energy consumption reduce emissions of carbon dioxide, making the financial system more inclusive tends to amplify the emission levels. More importantly, energy productivity gains and financial inclusion are observed to jointly reduce the CO2E figures of the Next 11 countries. Thus, it can be said that making more productive use of energy can, to some extent, neutralize the adverse environmenntal impacts of financial inclusion. Additionally, higher economic growth, greater international trade participation, and urbanization are evidenced to boost CO2E in these countries while higher renewable energy use is observed to curb the emission levels. Furthermore, heterogeneous country-specific outcomes are also witnessed. In particular, energy productivity improvement is seen to curb CO2E in eight of these nations while a simultaneous rise in the levels of energy productivity and financial inclusion is found to jointly mitigate and boost CO2E in 55% and 18% of the Next 11 nations, respectively. Hence, in line with these key findings, a set of critically important environmental development-related policies are suggested.

Automated summary

This study investigates the impact of energy productivity gains on carbon dioxide emissions in the Next 11 countries amidst their deteriorating environmental conditions. The findings show that energy productivity improvement and financial inclusion jointly reduce CO2 emissions, but a more inclusive financial system tends to amplify emissions. Furthermore, economic growth, international trade, and urbanization increase CO2 emissions, while greater renewable energy use curbs emissions. Heterogeneous outcomes are observed among these countries, with energy productivity improvement curbing emissions in eight nations and both energy productivity and financial inclusion mitigating and boosting emissions in 55% and 18% of the Next 11 countries, respectively.