This empirical study considers the load capacity factor, a more comprehensive indicator that takes into account both the demand and supply sides to measure environmental quality, and explores the role of green investment, environmental policy stringency, financial development, natural resources rent and trade openness in the context of the load capacity curve hypothesis for G-7 countries. To this purpose, this work employs the cross-sectional autoregressive distributed lag (CS-ARDL) model to investigate the impact of each variable. The results obtained suggest that green investment and environmental policy stringency both contribute to improve environmental quality by expanding the load capacity factor, while financial development and natural resource rent significantly reduce the load capacity factor and enhance environmental degradation. Additionally, the findings also validate the load capacity curve hypothesis in the G-7 context. Hence, the present study highlights that green investment and policy stringency are necessary to achieve ecological sustainability. Besides, it presents in-depth ecological solutions so that G-7 economies can implement finalized policy actions to reach the targets set in COP26.

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Transition Towards Environmental Sustainability: Evaluating the Role of Green Investment, Environmental Policy, and Financial Development on the Load Capacity Factor in G-7 Countries

  • Aamir Javed,
  • Agnese Rapposelli

摘要

This empirical study considers the load capacity factor, a more comprehensive indicator that takes into account both the demand and supply sides to measure environmental quality, and explores the role of green investment, environmental policy stringency, financial development, natural resources rent and trade openness in the context of the load capacity curve hypothesis for G-7 countries. To this purpose, this work employs the cross-sectional autoregressive distributed lag (CS-ARDL) model to investigate the impact of each variable. The results obtained suggest that green investment and environmental policy stringency both contribute to improve environmental quality by expanding the load capacity factor, while financial development and natural resource rent significantly reduce the load capacity factor and enhance environmental degradation. Additionally, the findings also validate the load capacity curve hypothesis in the G-7 context. Hence, the present study highlights that green investment and policy stringency are necessary to achieve ecological sustainability. Besides, it presents in-depth ecological solutions so that G-7 economies can implement finalized policy actions to reach the targets set in COP26.