Impact of Socioeconomic Factors and Energy Consumption on Environmental Quality
Muhammad Azam, Rashid Mehmood, Elie Bouri, Christopher E. C. Gan, Ahmed Imran Hunjra
Keywords:
environmental quality, CO2 emissions, institutional quality, ethnic polarization, energy consumption
Abstract:
This paper examines potential factors that affect CO2 emissions in 40 Asian countries between 1993 and 2022. Using various models with Driscoll-Kraay standard errors, cross-sectional time-series feasible generalized least squares (FGLS) regression, high-dimensional fixed effects (HDFE) linear regression, simultaneous quantile regression, and elastic net regression, the main results show that energy consumption significantly contributes to CO2 emission in the context of the Impact = Population·Affluence·Technology (IPAT) hypothesis. Ethnic polarization significantly increases CO2 emission levels, especially in regions with poor governance. At medium and high levels of emissions, foreign direct investment (FDI) helps in decreasing emissions, supporting the pollution halo hypothesis. Institutional quality, which stems from regulatory assurance and adherence to rules, performs an insurance function, reducing levels of environmental pollution in countries with moderate to high emission levels. Asian economies, therefore, should seek sustainable environmental development through renewable energy, improved governance, and eradication of ethnic polarization. Our findings are invaluable for policy making, offering means to navigate the growth-environmental dilemma and indicating the directions that should be taken to achieve sustainable growth.
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 10.7441/joc.2026.SI.02
Azam, M., Mehmood, R., Bouri, E., Gan, C. E. C., & Hunjra, A. I. (2026). Impact of Socioeconomic Factors and Energy Consumption on Environmental Quality. Journal of Competitiveness, 18(SI), 29–56. https://doi.org/10.7441/joc.2026.SI.02
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