The Impact of Institutional Quality on 𝑪𝑶₂ Emissions in Developing Economies

Impact of Governance Quality on Economic Growth

This study investigates the heterogeneous impact of governance quality on economic growth across 155 countries from 1996 to 2024. Utilizing the six Worldwide Governance Indicators (WGI) and an interaction fixed-effects model, the analysis disaggregates effects across least developed, developing, transitional, and developed economies. Results reveal that institutional impacts are highly development-contingent. While Political Stability consistently supports growth, dimensions such as Government Effectiveness and Rule of Law exhibit contrasting contemporaneous and lagged effects across several development groups, suggesting that rapid formalization and administrative reforms can impose short-term adjustment costs. Furthermore, Control of Corruption and Voice and Accountability show limited or context-specific significance, lending partial support to the “grease the wheels” and institutional sequencing hypotheses. These findings challenge the “one-size-fits-all” approach to institutional reform, suggesting that governance priorities must be calibrated to a country’s specific developmental stage and administrative capacity to effectively foster sustained economic growth. Additionally, the study contributes to the empirical literature by offering policy-relevant insights into how the sequencing and pacing of institutional reforms can mitigate unintended economic disruptions across different development contexts.

INSTITUTIONAL QUALITY, ECONOMIC GROWTH AND THE INTERACTIVE ROLE OF ENERGY INTENSITY ON CO₂ EMISSIONS IN BRICS ECONOMY

Rising carbon emissions in BRICS economies have intensified concerns about whether institutional quality and economic expansion can coexist with environmental sustainability. This paper examines institutional quality, economic growth and the interactive role of energy intensity on co₂ emissions in BRICS economy. The period for study spanned between 1990-2024. The study made use of ex-post facto research design. Data set for the study was sourced from WDI. The study made use of PARDL as the main estimation technique. The study found that government effectiveness has positive (5.04) and statistically insignificant (0.08) effect on CO2 emissions in BRICS economies, gross domestic product has positive (0.19) and statistically significant (0.00) effect on CO2 emissions in BRICS economies while energy intensity and governance effectiveness has negative (-0.10) and statistically insignificant (0.71) effect on CO2 emissions in BRICS economies. The paper concluded that governance effectiveness and economic growth contribute to rising CO₂ emissions in BRICS economies, while the interaction between energy intensity and governance effectiveness exerts a weak mitigating effect. The policy recommendation for the study is that governments in BRICS economies must enhance environmental governance through better regulation enforcement, better coordination of policies and accountability in environmental management. Environmental sustainability aims must be harmonized with economic growth strategies, through promoting green industrialization, adoption of renewable energy sources and investment in energy efficient technologies. Policymakers also need to step up efforts to enhance efficiency in energy consumption in the various sectors through modernization of industrial processes of production, promotion of cleaner technologies and adoption of energy saving policies.

Inclusive finance and carbon productivity: a new perspective from OECD countries

Within the severe context of climate change, enhancing Carbon Productivity (CP) to mitigate the rise in carbon emissions during economic development is pivotal for fostering a low-carbon economic transition. Financial Inclusion (FI), by expanding financial services, has enabled the allocation of capital to various sectors, including those focused on environmental sustainability. Nonetheless, the precise effect of FI on CP remains ambiguous at the international level. This study, based on the data from 33 OECD member countries from 2010 to 2019, empirically examines the impact of FI on CP. Our findings indicate: (1) FI directly enhances CP, with a marginal effect of 0.014%. This direct impact remains robust after undergoing various robustness checks and addressing endogeneity concerns. (2) Panel quantile regression further confirms this causal relationship, showing that the impact of FI on CP is consistently positive. However, the positive impact exhibits an “increase-decrease” inverted “V” pattern as CP improves. (3) Mechanism analysis of indirect impact reveals that the low-carbon consumption, energy structure, and technology upgrades exert significant partial mediating effects. (4) The positive impact of FI on CP varies across different contexts, showing a range of heterogeneities. The impact is particularly stronger in non-Eurozone countries, in settings with higher levels of income inequality, and during the period of stricter environmental regulation. First published online 31 July 2026

DETERMINANTS OF CO2 EMISSIONS IN MALAYSIA: AN EKC ANALYSIS

CO₂ emissions remain a major challenge to Malaysia’s sustainable development and transition toward a green economy. This study examines the determinants of CO₂ emissions in Malaysia from 1990–2024, focusing on GDP, energy consumption, and trade (imports and exports of goods and services). Guided by the Environmental Kuznets Curve (EKC) framework, the study investigates the long-run effects of these variables on environmental quality. Using annual data from the World Bank and econometric techniques including the Augmented Dickey-Fuller (ADF) unit root test, Akaike Information Criterion (AIC), cointegration, and regression analyses, the findings show that GDP, energy consumption, and imports significantly increase CO₂ emissions, supporting the inverted U-shaped EKC hypothesis. Exports exhibit mixed effects, with stronger impacts at higher emission levels, while energy consumption acts as a key channel through which trade influences environmental degradation. The results highlight the need for green economy strategies that promote energy efficiency and sustainable trade practices to decouple economic growth from environmental degradation. Despite being limited to data available up to 2024, the study provides valuable evidence for policymakers seeking to align Malaysia’s economic and trade objectives with international carbon reduction commitments.

Institutional policies for ICT-driven environmental sustainability in high- and middle-income Asian countries

Environmental degradation is a pressing global challenge, particularly across rapidly developing Asian economies. This study examines how information and communication technology (ICT) affects environmental quality and investigates whether institutional quality (IQ) moderates the ICT–CO2 emissions relationship. The study further explores heterogeneity between high and upper-middle income countries (HUMICs) and lower-middle income countries (LMICs) in Asia to understand how the level of economic development influences the environmental implications of digital transformation. The study uses panel data from Asian countries spanning 1995–2025. Countries are categorized into HUMICs and LMICs. To estimate both long-run and short-run dynamics and address heterogeneity, the analysis employs the pooled mean group–autoregressive distributed lag (PMG-ARDL) model. An interaction term (ICT × IQ) is included to assess the moderating role of institutional quality. Results reveal significant heterogeneity across income groups. ICT has a negative and statistically significant long-run effect on CO2 emissions in HUMICs, indicating that digital expansion contributes to emission reductions in more advanced economies. Conversely, ICT exerts a positive and significant long-run effect in LMICs, suggesting that early-stage digitalization increases emissions. The interaction term is positive and significant in HUMICs, implying that stronger institutions shape the emission-reducing potential of ICT. In LMICs, the interaction term is negative and significant, indicating that improved governance mitigates ICT-induced emissions. This study contributes to the existing body of knowledge by jointly examining ICT, institutional quality and environmental degradation across different income groups for Asian economies, highlighting the heterogeneous nature of digitalization's environmental impact.

The role of governments in emission cuts: evidence from emerging and advanced economies 1