Investigating the causal relationship between environmental degradation and selected economic factors: evidence from G20 countries

In the course of rapid economic development, attainment of environmental sustainability and climate change mitigation issues have received considerable attention in the G20 countries in the twenty-first century. The socio-economic driving forces behind environmental performance in these countries involve long-run interconnection between environmental quality and economic achievement. This study attempts to re-investigate the impact of real gross domestic product (RGDP), foreign direct investment (FDI), urban population (UP) and energy consumption on ecological footprint (EF) and CO2 emission by applying panel PMG/ARDL estimation technique for the period 1990–2018. First, it is observed that real GDP and non-renewable energy consumption (NREC) are the driving factors behind both ecological footprint and carbon emissions in both short and long run. In addition, FDI has a negative effect on EF, while it positively affects air pollution in the long run. Lastly, urban expansion is found to contribute to improve environmental quality in the long run, while renewable energy consumption (REC) is projected to reduce carbon emission in both periods. The outcomes of Granger causality test do not reveal the existence of an error correction mechanism but the direction of short-run causality supports bidirectional effect of EF with RGDP and NREC, and CO2 with RGDP, UP and NREC. Several policy measures are suggested to put the pressure on EF and CO2 emission on hold, consistent with the spirit of sustainability.