THE DRIVERS OF ENVIRONMENTAL DEGRADATION IN ASEAN plus China: DO FINANCIAL DEVELOPMENT AND URBANIZATION HAVE ANY MODERATING EFFECT?

This study examines the drivers of environmental degradation in ASEAN + China. It focusses on three unresolved questions: (i) Does the inclusion of China in ASEAN panel aggravate environmental degradation, given that China is a high carbon emissions country? (ii) Does financial development moderate the impact of energy consumption on environmental degradation in ASEAN? (iii) Does urbanization moderate the impact of energy consumption on environmental degradation in ASEAN? It employs empirical strategies that account for heterogeneity, endogeneity and cross-sectional dependence. The results show that economic growth, energy consumption and non-renewable energy aggravate environmental degradation, whereas renewable energy, foreign direct investment and trade openness mitigate it. The inclusion of China in ASEAN panel weakens the EKC hypothesis. Financial development favorably moderates the effect of energy consumption on environmental degradation in ASEAN, but adversely moderates the effect in ASEAN + China. Urbanization adversely moderates the impact of energy consumption on environmental degradation in both panels. Hence, efforts to address environmental degradation should consider these different drivers.

Automated summary

This study examines the drivers of environmental degradation in ASEAN + China, focusing on the impact of China's inclusion, financial development, and urbanization on the relationship between energy consumption and environmental degradation. The results show that economic growth, energy consumption, and non-renewable energy worsen environmental degradation, while renewable energy, foreign direct investment, and trade openness mitigate it. The inclusion of China weakens the environmental Kuznets curve hypothesis, and financial development has a favorable impact on ASEAN but adverse impact on ASEAN + China. Urbanization adversely moderates the impact of energy consumption on environmental degradation in both panels.