Energy 241 (2022) 122515

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Energy
journal homepage: www.elsevier.com/locate/energy

How do financial development, energy consumption, natural

resources, and globalization affect Arctic countries' economic growth
and environmental quality? An advanced panel data simulation
Muhammad Usman a, b, *, Atif Jahanger c, Muhammad Sohail Amjad Makhdum b,
Daniel Balsalobre-Lorente d, e, Adnan Bashir f
a
Institute for Region and Urban-Rural Development, Wuhan University, Wuhan, 430072, Hubei Province, China
b
Department of Economics, Government College University Faisalabad, 38000, Pakistan
c
School of Economics, Hainan University, Haikou City, Hainan, 570228, China
d
Department of Political Economy and Public Finance,Economics and Business Statistics and Economic Policy, University of Castilla-La, Mancha, Spain
e
Department of Applied Economics, University of Alicante, Spain
f
Department of Management and Administrative Science, University of Gujrat, 50700, Pakistan

a r t i c l e i n f o a b s t r a c t

Article history: In the modern era of globalization, financial and natural resources are considered the vital indicators that
Received 16 February 2021 intensely contribute to mitigate environmental degradation and boost economic growth. Therefore, it is
Received in revised form necessary to realize a more significant assessment of the intricacies of determining greenhouse gas
17 September 2021
(GHG) emissions and economic growth. The current research analyzes the dynamic association between
Accepted 31 October 2021
Available online 3 November 2021
financial development, natural resources, globalization, non-renewable, and renewable energy con-
sumption on GHG emission and economic growth for eight Arctic countries from 1990 to 2017. Addi-
tionally, the current study confirms the presence of cross-sectional dependency by employing the
Keywords:
Economic growth
second-generation panel unit root, cointegration, and long-run elasticity estimation tests for robust
Greenhouse gas emissions and efficient outcomes. The findings explored that financial development and renewable energy con-
Natural resources sumption considerably condense environmental deterioration, while other potential factors like glob-
Energy consumption alization, economic growth, and non-renewable energy contribute to increased environmental
Arctic countries degradation. Moreover, financial development, natural resources, globalization, non-renewable, and
renewable energy boost economic growth. Based on these empirical outcomes, several policy recom-
mendations are formulated to overcome and control the environmental damages without hindering
economic growth for the Arctic region.
© 2021 Elsevier Ltd. All rights reserved.

1. Introduction developing and developed countries have been stressed about

Since the 1950s, environmental contamination has been
considered the main hindrance to achieving the way of sustainable
growth for the reason that it keeps various ecological challenges,
including global warming, climate change, water scarcity, defor-
estation, high global temperature, and pollution level that everyone
has happened to an imperative hazard. In this regard, most of the
* Corresponding author. Institute for Region and Urban-Rural Development,
Wuhan University, Wuhan, 430072, Hubei Province, China.
E-mail addresses: usman399jb@gmail.com (M. Usman), atif_jahanger@hotmail.
com (A. Jahanger), sohailmakhdum@hotmail.com (M.S.A. Makhdum), Daniel.
Balsalobre@uclm.es (D. Balsalobre-Lorente), adnan.bashir@uog.edu.pk (A. Bashir).
fighting the environmental concerns augmented from individual
human actions [1]. In this respect, climate change mitigation has
developed into a vital spotlight for several policy ventures. At
present, it appears as a universal trend owing to its essential
function in accomplishing the sustainable improvement in the
production process that is a solitary substitute for humankind to
live [2]. For that reason, the issues related to environmental vari-
ations have grown to be one of the most critical continuing ap-
prehensions due to the detrimental consequences of calamitous
climatic measures and global warming that keep demolishing the
entire world.
Additionally, an environmental variation originates mainly from
the augmentation of greenhouse gas (GHG) emissions. Moreover,

https://doi.org/10.1016/j.energy.2021.122515
0360-5442/© 2021 Elsevier Ltd. All rights reserved.
M. Usman, A. Jahanger, M.S.A. Makhdum et al.
air pollution causes diseases in humans like pneumonia, bronchitis,
lung cancer, and mental health issues [3,4]. The utilization of non-
renewable energy sources is adding to GHG emissions, which en-
courages global warming. The world has not consummated the
economic growth rate (GDP) that makes sure utilizing sustainable
resources. Unfortunately, this has increased the crucial distress
concerning the sustainability of this growth course due to an in-
crease in GDP while exploiting the resources and increasing the
demand for non-renewable energy, which are the primary cause of
environmental pollution [5]. The association between GDP growth,
financial development, energy consumption, globalization, and
ecological issues has ejected a worldwide debate among environ-
mentalists and policymakers. Therefore, sustainability disquiets.
Globalization is a phenomenon related to making the consortia
of businesses and economic cooperation with each other. It has
enhanced economic growth by linking the nations through politi-
cal, cultural, social, and economic domains. However, despite
playing an important role in increasing industrialization, including
energy use creates a harmful impact on environmental quality
[6,7]. Since the start of globalization, there has been an increase of
2.7% in GHG emissions per annum, thus, playing a significant role in
global warming and atmospheric variations. The carbon dioxide
(CO2) emissions have contributed to increasing the considerable
share of GHG emissions released in the air, constituting around 60%
of these dangerous gases, damaging environmental quality [8].
However, pro-globalization supporters treat deterioration in envi-
ronmental quality as a trade-off between environment and eco-
nomic growth. On the other way, globalization has increased
economic growth by increasing trade and foreign direct investment
[9,10].
The natural resource diminution owing to exhaustive economic
growth is the chief driver of environmental degradation. It is
observed that extraction of natural resources has become more
than double over the previous six years; for instance, coal, oil, and
gas extraction increased from 6 billion tons to 15 billion tons. The
biomass production has risen from 9 billion tons to 24 billion tons,
and additionally, mineral resources also increased five-folds [11]. It
is roughly seen that 60 billion tons of natural resources are being
grasped by human beings annually, which constitutes to 50% in-
crease as compared to the situation of 30 years back [12].
Furthermore, social and economic development is also led to
resource over-consumption, which is over the global potential for
redeveloping its resources. Consistent with these concerns, it raises
the following fundamental questions: (a) How do natural resources
affect the strategy of cleaner production policies and environ-
mental quality? (b) How globalization cooperates in determining
cleaner production strategies and natural resources management?
(c) Do natural resources produce harmful activities for the envi-
ronmental quality due to mismanagement and unsustainable uti-
lization of sources? (d) How globalization contributes to
overcoming the negative effect of resource abundance/dependence
on the sustainable environment? Is there any association between
globalization, natural resources, financial development, and GHG
emissions? In this pursuit, to accomplish the coordinated growth of
an economy, ecology, society, and circular economy, preserving
sustained economic development with minimum resource utili-
zation and atmospheric pollution is the most desirable situation
[13]. Thus, it is vital to know the apprehensions concerning natural
resource depletion. This investigation tackles such hypotheses for
Arctic economies covering the spanning from 1990 to 2017.
United Nations (UN) member countries have implemented the
2015 Sustainable Development Goals (SDGs) that need them to
stable economic growth, energy utilization, natural resources, and
significant environmental concerns. As a crucial common
manufacturing substance, energy plays an exceptional part in the
2
Energy 241 (2022) 122515
progression of the economic development of the worldwide
economies [14]. Considering this argument, non-renewable and
renewable energy use has played a critical role in promoting GDP
growth and environmental sustainability. It is essential to decouple
the atmosphere humiliation from the economic growth-energy
utilization trajectory [15]. Hence, it is imperative to know the
causal association between GDP growth, natural resources, non-
renewable and renewable energy use, and GHG emissions. Over-
using and exploiting fossil fuels, coal, gas, and petroleum-based
conventional products have led to polluting the environment as
terrible side effects for swift economic development [16]. There-
fore, the current study scrutinizes the association between financial
development, globalization, GDP growth, non-renewable and
renewable energy consumption, natural resource rent, and GHG
emission nexus for Arctic countries' environment and economic
growth functions.
Arctic region is gaining attention by considering its economic,
political, and ecological importance. It is located between the
continents of Asia, America, and Europe making it a geographically
important region with its economic development. If one looks at
the level of economic development, here again, the difference is
significant. However, in terms of per capita GDP (on purchasing
power parity basis), the U.S. is the wealthiest country among all
other Arctic countries (36,200$). Other Arctic countries such as
Denmark, Norway, Canada, Sweden, Iceland, and Finland, have
their value of GDP per capita around the range of (22,000$-
28,000$), whereas Russia covers 7700$ per capita GDP [17]. The
Arctic countries are situated away from the north of the Arctic
surround (66
330 N), and rely on eight countries: Canada, Denmark
(Greenland), Finland, Sweden, Iceland, Russia, Norway, and the
United States (Alaska). The shipping routes and the area covered by
bulk carriers have seen a 25% and 160% increase respectively from
2013 to 2019 [18]. The Arctic region has more than 17 trillion cubic
feet of undiscovered gas, 44 billion barrels of natural gas reserves,
and around 90 billion barrels of oil [19], accounting for 33% and 13%
of global gas and oil reserves, respectively. Similarly, about 1/4 of
the earth's hydrocarbon, i.e., gas reserves in the region. The region
has an economy of 450 billion, and it has seen an enormous rise in
foreign direct investment (FDI), with China being the leading player
with an investment of 1.4 trillion dollars during 2005e2017 [20].
The contributions of the current study are three-fold: (i) It is the
first study to investigate the influence of financial development,
globalization, natural resources, renewable energy utilization, and
non-renewable energy utilization on economic growth and GHG
emissions in the case of Arctic countries. (ii) Several potential in-
dicators such as financial development, natural resource rents, and
renewable energy sources are incorporated in the pre-determined
environment and economic growth functions. The insertion of
such potential indicators would assist in reflecting the earnings
from natural resources of Arctic countries to their pollution
constrain policies and strategies. The mitigation of environmental
degradation has become the fundamental policy agenda, especially
in the Arctic countries functioning determinedly. To offer such in-
structions for achieving these mitigation targets, the current study
considers some crucial drivers of the environment and economic
growth to achieving the Sustainable Development Goals (SDGs)
targets in decreasing the GHG emissions. (iii) A more reliable and
robust long-run panel data elasticity estimation approach, called
mean group (MG), common correlated effect mean group (CCEMG),
and augmented mean group (AMG) estimators are employed,
which counter the problem of cross-sectional dependency (CSD)
and slope parameters heterogeneity across each cross-section.
Therefore, this study is imperative in contributing to the existing
literature by deliberating new indicators and efficient, reliable, and
consistent outcomes.
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

2. Literature review and hypothesis development renewable energy economies from 1985 to 2011. The findings
revealed that financial development reduces environmental
Several empirical studies have discussed the dynamic nexus degradation by providing loans/incentives for updated production
between financial development, natural resources, non-renewable technologies to improve environmental quality. The specified
and renewable energy consumption, and environmental sustain- literature review displays that financial development has a diverse
ability, and we deliberated these earlier studies in the following effect on environmental performance, and the current empirical
heading. literature is still unable to draw any consensus. Given the empirical
and theoretical frameworks lead to the first testable Hypothesis as
2.1. Financial development and the environment nexus follows:
Hypothesis 1a,b. Financial development significantly impacts the
Theoretically, several researchers hold conflicting views about
Arctic region's environmental degradation and economic growth.
the role of financial progression on environmental excellence.
Numerous studies, such as Zafar et al. [6] and Zaidi et al. [21],
2.2. Natural resources and the environment nexus
argued that a developed financial system enhances the atmo-
spheric eminence by providing funds/incentives for eco-friendly
In recent years, environmental sustainability and resource
technologies and renewable energy infrastructures through the
abundance have gained more attention from scholars, govern-
financial mechanism and/or transfer of technology from developed
ments, researchers, and policymakers. The obligation of environ-
countries. These studies can be categorized as the “adverse influ-
mental degradation and climate change is associated with
ence” of financial expansion on environmental degradation. Other
economic activities. The GDP growth drives urbanization and
studies like Saud et al. [22], Usman and Hammar [23], and Liu and
industrialization that increase the exploitation of natural resources
Song [24] examined that financial development increases envi-
and enhance agricultural productivity. All these economic activities
ronmental degradation due to the following aspects: initially, the
diminish the natural resources through waste generation above the
financial sector provides funds to enterprisers at minimum cost for
emancipator abilities of the natural environment. Understanding
expanding new production line, installation/renting more equip-
the association between natural resources, GDP growth, and envi-
ment, and on the other hand financial sector provides finances/
ronmental dilapidation is applicable for policy examination and
loans for enhancing the acquisition of energy-intensive types of
development in renewable energy production industries. In the
machinery such as automobiles, vehicles, and other applications. In
recent literature by Khan et al. [29], the association among natural
sum, financial development increases energy utilization and en-
resources, energy utilization, tourism development, and environ-
hances GHG emissions, resulting in environmental degradation.
mental degradation using the Generalized Method of Moments
However, many scholars have perused the nexus between financial
(GMM) technique in the Belt & Road Initiative (BRI) from 1990 to
development and environmental degradation worldwide and
2016 was explored. Their findings revealed that natural resources
found opposing evidence [2,23]. In their empirical studies, Saud
enhance environmental degradation in the underlying region.
et al. [22] inspected the link between financial development and
Similarly, Sun et al. [30] investigated the dynamic nexus be-
globalization with environmental degradation in One Belt One
tween tourism, natural resources, energy use, and environmental
Road (OBOR) countries from 1990 to 2014. The findings concluded
quality from 1995 to 2015. The results revealed that natural re-
that financial development is positively correlated to the ecological
sources play a significantly adverse impact on environmental sus-
footprint indicating that financial institutions are not presenting a
tainability. In addition, Ulucak and Khan [31] investigated the
significant opportunity for eco-friendly technologies in OBOR
causal relationship between natural resources, urbanization, en-
countries. While considering globalization, the indicator harms
ergy consumption, and environmental deterioration in BRICS
ecological footprint due to the technique effect.
countries from 1992 to 2016. The outcomes of this study revealed
In the same vein, Usman et al. [25] applied the AMG technique
that energy utilization, urbanization, and resource rent were found
to scrutinize the association between inbound tourism, financial
to reduce environmental degradation through updated technolo-
development, energy utilization, and ecological footprint in the 20
gies. These technologies assimilate recycling, value-addition,
highest emitting economies. Their findings explored that the
reprocessing, and innovation that help replace natural resources,
developed financial sector of an economy undermines environ-
which will ultimately boost real economic growth and contribute to
mental quality, demonstrating that financial development endorses
environmental quality.
employment opportunities through an increased level of invest-
Furthermore, Zafar et al. [32] found that natural resources have a
ment that increases the aggregate level of energy utilization due to
favourable outcome on environmental quality. Entirely different
massive economic development procedures at the cost of envi-
results were found by Ahmed et al. [33], who reported an adverse
ronmental degradation. Similarly, Lu [26] tested the impact of
effect of natural resources rent on environmental performance. The
financial improvement, energy consumption, and environmental
aggregate influence between natural resources and the environ-
quality in the 12 Asian countries and found that financial devel-
ment would be indomitable by the comparative extent of the
opment enhances environmental degradation due to limited
negative/positive effects. Resting on the assumed, empirical and
financial channels. However, vast energy literature conveyed the
theoretical literature, we speculate our second testable Hypothesis
eco-friendly and emission-free role of financial development.
as follows:
Tamazian and Rao [27] investigated the dynamic association be-
tween institutional quality, financial development, and the envi- Hypothesis 2a,b. Natural resources significantly influence envi-
ronment in transitional economies from 1993 to 2014. Their results ronmental degradation and economic growth in the Arctic region.
revealed that financial expansion has a favourable outcome on
environmental sustainability because the financial sector has given 2.3. Energy utilization and the environment nexus
finances to the ventures for emission-free technologies that
enhance economic growth by minimizing the utilization of tradi- Energy consumption is an inevitable element for the GDP
tional energy. Likewise, Dogan and Seker [28] probed the causal growth and expansion of the economies. On the contrary, it is a
link between the financial development, non-renewable and promoting source of GHG emissions that ultimately degrades
renewable energy use, and ecological sustainability for top environmental performance. Precisely, the utilization of non-
3
M. Usman, A. Jahanger, M.S.A. Makhdum et al.
renewable energy is directly connected with GHG and CO2 emis-
sions. Therefore, the economies need to minimize the utilization of
non-renewable energy to reduce GHG emissions and thus pro-
moting atmospheric performance [34,35]. On this basis, the
scholars propose that policymakers should advise substituting
fossil fuel energy utilization with renewable energy resources [2].
Moreover, Usman et al. [36] investigated the nexus between
developing countries' financial development, trade openness, and
renewable and non-renewable energy consumption. The empirical
findings reveal that renewable energy significantly protects envi-
ronmental quality. On the other side, non-renewable energy re-
duces it in both developing and developed countries. Several
scholars have investigated the association between renewable en-
ergy use and the environment worldwide and establish similar
evidence [9,37]. However, many other studies described the
carbon-free role of energy utilization [24,38]. The limited literature
on the association between energy consumption and environ-
mental sustainability might conceivably impact atmospheric
degradation. This impact could be nominated as either positive or
negative, depending on the period/sample of the countries. Given
the empirical and theoretical perspective that leads to the third and
fourth testable Hypothesis presented as follows:
Hypothesis 3a,b. Non-renewable energy consumption signifi-
cantly affects the Arctic region's environmental degradation and
economic growth.
Hypothesis 4a,b. Renewable energy consumption affects envi-
ronmental degradation and economic growth in the Arctic region.
2.4. Globalization, economic growth and environment nexus
Theoretically, earlier studies review the different channels (e.g.,
scale, composition, and technique) through which globalization
influences environmental degradation [21,34]. The scale effect in-
creases due to globalization that enhances the investment and
production of goods due to more conventional energy consumption
and thereby enhances the GHG emission, leading to degrading the
quality of the environment [39]. The composition effect suggests
that the globalization process significantly influences environ-
mental sustainability based on the variation in the industrial
structure of an economy [40]. Finally, the technique effect depicts in
several channels (i.e., eco-friendly technology) by which global-
ization influences environmental degradation [41]. Scale effect
negatively impacts the globalization process on an environmental
eminence [42,43]. However, several empirical studies, i.e., Ulucak
et al. [5], Saud et al. [22], Ahmed et al. [33], and Yang et al. [34], have
reported that globalization mode has a favourable influence on
ecological performance. These findings depict that globalization
brings eco-friendly technologies that boost real GDP growth with
the least environmental degradation and sustain the technique
effect channel. In sum, previous empirical studies suggest that the
influence of globalization on environmental sustainability could be
either positive or negative based on the period/size of the coun-
tries. Moreover, some studies have discovered the association be-
tween GDP and environmental deterioration [2,7,25,35,36,44,45].
Given the empirical and theoretical perspective, this will lead to the
fifth and sixth testable hypotheses mentioned as follows:
Hypothesis 5a,b. The globalization process significantly affects
the Arctic region's environmental degradation and economic
growth.
Hypothesis 6. Economic growth significantly affects the envi-
ronmental degradation in the Arctic region.
The economic growth of Arctic countries is closely related to a
4
Energy 241 (2022) 122515
series of GHG emissions. To discover the efficiency of economic
growth policies on GHG emissions, this study examines the influ-
ence of potential economic and environmental variables from
Arctic countries' perspectives. To test the environment and growth
function, this study tests the various Hypothesis. In this pursuit,
Fig. 1 shows the possible hypothesis development of the analyzed
study.
3. Data, empirical model, and methodological framework
3.1. Data
To investigate the effect of financial development, natural
resource, globalization, non-renewable and renewable energy use
on greenhouse gas emissions and economic growth, a balanced
longitudinal dataset was employed for eight Arctic countries:
Denmark, Canada, Sweden, Finland, Norway, Iceland, Russian
Federation, and the United States during 1990e2017. The compre-
hensive environmental indicators like greenhouse gas emissions
(GHG) is taken in an aggregate of Kilotons (Kt) of carbon dioxide
equivalent, the real economic growth (GDP) is measured in con-
stant 2010 US$ per capita, the natural resource rents (NRR) is the
summation of coal rents, oil rents, natural gas rents-both soft and
hard, forest rents, and mineral rents. These all component rents are
reproduced by the physical quantities countries extract to verify the
rents for each commodity measured in GDP share. Financial
development (FD) is measured in index form (0e100), the variable
globalization (GLO) is also taken in index form, the variable, non-
renewable energy consumption (NREC) is calculated in a kilogram
of oil equivalent per capita, and renewable energy consumption
(REC) is measured in the share of final energy use. The GHG and
GDP indicators are applied for measuring environmental degrada-
tion and economic growth, respectively. The data of GHG emission,
NRR, GDP growth, NREC, and REC is extracted from the World Bank
database [46]. However, the data of FD and GLO are gathered from
the International Monetary Fund (IMF) and Dreher, respectively
[47,48]. All the descriptions and data sources of the variables
mentioned above are expressed in Table 1.
3.2. Specified model
This study builds on the literature of Ulucak and Khan [31] and
Alola et al. [49] by integrating financial development, globalization,
and natural resources. This study's dataset (variables) is converted
into the natural logarithm algorithm to overcome the probability of
data sharpness and heteroscedasticity. The Cob-Douglas form of
the environmental function is articulated in Eq. (1) as follows:
GHGit ¼ f ðFDit ; NRRit ; GDPit ; NRECit ; RECit ; GLOit Þ (1)
Log transformation of environmental function is expressed in
Fig. 1. Graphical hypotheses scheme. H denotes the hypotheses, a, and b denote the
environment and growth function, respectively. The þ (positive) and e (negative)
denote the expected sign of the coefficients.
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

Table 1
Variables description.

Variables Description Unit of measurement Data sources

GHG Greenhouse emissions Metric tons of CO2 equivalent per capita WDI
FD Financial development index Relative ranking of the country comprising with IMF
access, depth, and effectiveness of financial
institutions and markets
NRR Natural resource rent Natural resource rents in % of GDP WDI
GLO Globalization KOF index Dreher
GDP Economic growth Constant 2010 US$ in per capita WDI
NREC Non-renewable energy use Oil equivalent per capita in kg WDI
REC Renewable energy use % of total final energy use WDI

Eq. (2) as follows: The statistical correlations, among concerned all seven variables
mentioned above after natural logarithm, are presented in Table 3.
lnðGHGit Þ ¼ a0 þ a1 lnðFDit Þ þ a2 lnðNRRit Þ þ a3 lnðGDPit Þ The dependent variable (GHG) is positively associated with the
þ a4 lnðNRECit Þ þ a5 lnðRECit Þ þ a6 lnðGLOit Þ þ εit (2) natural resource rents (0.6345) and non-renewable energy con-
sumption (0.7688), followed by financial development (0.3763),
The Cob-Douglas form of economic growth (GDP) function is globalization (0.2402), economic growth (0.4489), and renew-
presented in Eq. (3) as follows: able energy consumption (0.2618). In addition, natural resource
rent is adversely correlated with financial development (0.2413)
GDPit ¼ f ðFDit ; NRRit ; NRECit ; RECit ; GLOit Þ (3) and non-renewable energy consumption (0.3731).
Log transformation of Eq. (3) is represented in Eq. (4) as follows:
3.3. Methodological framework
lnðGDPit Þ ¼ b0 þ b1 lnðFDit Þ þ b2 lnðNRRit Þ þ b3 lnðNRECit Þ
þ b4 lnðRECit Þ þ b5 lnðGLOit Þ þ εit 3.3.1. Cross-sectional dependency tests
Due to the trend of rising interdependence, countries' panels
(4)
can make evident cross-sectional dependence (CSD), and for itself,
it is essential to perform a CSD test for the panel. To do this, the
where i,t and εit indicate the cross-sections, time periods, and
current study proceeds with the investigation of CSD tests, as a
stochastic error terms of environmental and economic growth
result, to address the problem of panel data estimation and make
functions. Additionally, in the environment function, the expected
sure that the empirical estimators are consistent, efficient, and
sign of financial development is negative due to Arctic countries'
unbiased. Initially, four different CSD tests are employed for this
have sound and developed financial structure, which may over-
intention, such as Pesaran scaled LM, Pesaran CSD, Breusch-Pagan
come the environmental pressure in this region. The expected sign
LM, and Bias-corrected scaled LM as developed by Pesaran [52],
of NRR is positive because NRR abundance is not sufficient to
Pesaran et al. [53], Breusch and Pagan [54], and Baltagi et al. [55]
assemble the energy requirement of that particular country. This
with the Eqs. 5and 6 are expressed as follows:
process will increase the dependency on fossil fuel imports and
reduce environmental quality [50]. In contrast, Balsalobre-Lorente sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi !
2T X
N1 X
N
et al. [51] observed a positive association between NRR and envi- CSD ¼ b
b  Nð0; 1Þ i; k (5)
ik
ronmental degradation. The study predicts an adverse coefficient NðN  1Þ
i¼1 k¼iþ1
sign for REC due to the optimistic character of REC in reducing GHG
emissions. On contrarily, the impact of GDP and NREC on envi- CSD ¼ ð1; 2 ……… 40 ……․ NÞ
ronmental degradation is expected to be positive
[15,23,25,31,35,45,51]. In neutral, the effect of GLO on environ- sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi !" 2 2 #
mental degradation is still unclear. Several studies, such as Godil 2T X
N1 X
N
b ðT  KÞ b
b ik  ðT  KÞ bb ik
M¼ b ik (6)
et al. [42] and Suki et al. [43], explained globalization's unfav- NðN  1Þ 2
ourable influence on the environment. On contrarily, other empir-
i¼1 k¼iþ1 VarðT  KÞ b
b ik
ical studies, i.e., Ulucak et al. [5], Jahanger et al. [13], Saud et al. [22],
where the size of the panel (cross-section) and sample size (pe-
and Yang et al. [34], found that the process of globalization has a
riods) are symbolized by the symbol N and T respectively, it is
positive influence on atmospheric sustainability. As a result, the
proved that the presence of CSD within the dataset will move more
expected coefficient sign of globalization in environment function
concentration to apply the second-generation panel data approach.
may be negative or positive. Moreover, all the coefficient signs of
This will justify the more appropriate stationary results by
the variables mentioned above are expected to be positive in the
employing the second-generation panel stationary tests. Fig. 2
economic growth function.
shows the econometric procedure of the present study.
The current study explores the descriptive statistical analysis of
the series from eight Arctic countries, as presented in Table 2.
Collecting the information from Table 2 presents that all the series 3.3.2. Panel unit root tests
such as lnFD, lnNRR, lnGLO, lnGDP, lnNREC, and lnREC except The first-generation panel stationarity tests (i.e., Levin, Lin and
lnGHG demonstrate a long left-tail (negative skewness) with lnFD Chu, Hadri, Breitung, Im, Pesaran and Shin, augmented Dickey-
containing the lowest negative skewness. While lnFD, lnNRR, Fuller, and Phillip Perron) failed to counter CSD in the longitudi-
lnGLO, lnGDP, and lnNREC show a leptokurtic distribution, lnGHG nal dataset. This research applies second-generation panel unit root
and lnREC show platykurtic distribution. tests such as cross-section augmented Dickey-Fuller (CADF) and

5
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

Table 2
Descriptive statistics.

Stats. lnGHG lnFD lnNRR lnGLO lnGDP lnNREC lnREC

Mean 12.2255 4.04291 0.56311 4.367374 10.56740 4.006014 2.653660

Median 11.2664 4.15571 0.08264 4.405301 10.72880 4.144350 3.071782
Maximum 15.7957 4.49481 3.07762 4.507813 11.42481 4.590323 4.117067
Minimum 8.18457 4.44087 8.37164 3.832419 8.613539 2.327761 0.642243
Std. Dev. 2.16124 0.84684 3.00514 0.119113 0.637559 0.540436 1.087783
Skewness 0.20831 9.02339 1.51091 1.594406 1.604634 1.272736 0.292758
Kurtosis 2.06352 90.7618 4.46195 5.885496 5.084208 4.174488 1.677446
Jarque-Bera 9.80531 74926.3 105.1747 172.6163 136.6710 73.34926 19.52513
Probability 0.00742 0.00000 0.000000 0.000000 0.000000 0.000000 0.000058
Sum 2738.51 905.612 126.1375 978.2917 2367.097 897.3472 594.4197
Sum Sq. Dev. 1041.63 159.924 2013.887 3.163922 90.64528 65.13189 263.8698
Observations 224 224 224 224 224 224 224

Table 3
Correlation matrix

Variables lnGHG lnFD lnNRR lnGLO lnGDP lnNREC lnREC

lnGHG 1.0000
lnFD 0.3763* 1.0000
t-Statistic 3.5375 e
Probability 0.0000 e
lnNRR 0.6345* 0.2413* 1.0000
t-Statistic 12.2316 5.3627 e
Probability 0.0000 0.0000 e
lnGLO 0.2402* 0.5517* 0.1715** 1.0000
t-Statistic 3.6868 9.8421 2.5942 e
Probability 0.0003 0.0000 0.0101 e
lnGDP 0.4489* 0.3539* 0.1659** 0.7572* 1.0000
t-Statistic 7.4747 5.6378 2.5075 17.2767 e
Probability 0.0000 0.0000 0.0129 0.0000 e
lnNREC 0.7688* 0.3731* 0.7873* 0.0366 0.2696* 1.0000
t-Statistic 17.9127 3.552 19.0237 0.5381 4.1721 e
Probability 0.0000 0.0000 0.0000 0.5910 0.0000 e
lnREC 0.2618* 0.1987* 0.3703* 0.7353* 0.6222* 0.3803* 1.0000
t-Statistic 4.0298 3.0215 5.9412 16.1674 11.8435 3.2012 e
Probability 0.0001 0.0028 0.0000 0.0000 0.0000 0.0000 e

Note: * & ** indicate the significance level at 1% and 5% respectively.

cross-section Im, Pesaran and Shin (CIPS) tests developed by

Pesaran [56] to reduce this concern. Due to their asymptotic X
N
CIPS ¼ N 1 di ðN; TÞ (9)
assumption, these panel unit root tests are better and robust in
i¼1
performance and do not need (N/∞). The CADF and CIPS tests
generate accurate information about the integration order of the where the coefficient di ðN; TÞ denotes CADF test statistics, which is
series. The Pesaran [75] CADF panel stationary test is articulated in also replaced with this term, and it is also expressed in Eq. (10) as
Eq. (7) given as follows: follows:

X
N
CIPS ¼ N 1 CADFi (10)
DYit ¼ bi þ di yi;t1 þ li yt1 þ Ji Dyt þ mit (7) i¼1

Inserting the lag term (t-1) in Eq. (7) outcome the following Eq.
(8) is listed as follows:

3.3.3. Westerlund cointegration test

After testing the integration order of the analyzed variables, it is
X
p X
p a dire requirement to check the long-run association among series.
DYit ¼ bi þ di yi;t1 þ li yt1 þ Jij Dytj þ qij Dyi;tj þ mit For this reason, Westerlund [57] developed the error correction
j¼0 j¼1 based (ECM) cointegration test that takes into account the CSD and
(8) slopes heterogeneity issues and does not base profoundly on pre-
vious information on the subject of the integration orders of the
where Dyi;tj and ytj denote the first difference operator and av- series that tolerate the solidity ranks of the regressors to be
erages of the lagged level of each individual cross-section. The CIPS different. Therefore, this test can be employed under a very com-
second-generation unit root test is also presented in Eq. (9) as mon situation. Finally, this approach tends to a discretionary
follows: bootstrap process that allows many repetitions of the long-run
6
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

Fig. 2. Steps of econometric modelling strategy.

  X
q
DXi;t ¼ aˊi di þ bi Xi;t1  d0i Yi;t1 þ bi;j DXi;tj
j¼1
(11)
X
q
þ hi;j DYi;tj þ εi;t
j¼0

where bi shows the adjustment speed that corrects the system

back to long-run equilibrium. However, error correction based
Westerlund cointegration tests consist of four different test statis-
tics such as Gt, Ga, Pt, and Pa, which is calculated by Eqs. (12) and
Fig. 3. Graphical presentation of long-run relationships for the analyzed regressors on
(13) expressed as follows:
GHG emissions and economic growth.

1 XN
di
Gt ¼ (12)
cointegration tests. This approach is mainly based on four test N i¼1 S:E:ðbdiÞ
statistics, including two mean-group tests (Gt and Ga) and two-
panel tests (Pt and Pa). The mean group test statistics disclose the
alternative Hypothesis (H1) with the minimum at one long-run
association among variables, and the panel tests assume as H1 1 XN
Tdi
Ga ¼ (13)
that the panel is long-run cointegrated [2,15,23,25,37]. Westerlund N i¼1 dˊi ð1Þ
long-run cointegration test is presented in Eq. (11) as follows:
And panel cointegration tests statistics (Pt and Pa) is calculated by
the Eqs. (14) and (15) as follows:
7
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

study applies four different CSD tests: Pesaran Scaled LM, Breusch-
b
d Pagan LM, Bias-corrected scaled LM, and Pesaran CSD. The out-
i
Pt ¼ (14)
S:E:ðb
diÞ comes of all CSD tests are listed in Table 4, which concludes that
CSD significantly exists in the dataset. More specifically, all the
variables (i.e., lnGHG, lnFD, lnNRR, lnGLO, lnGDP, lnNREC, and
Pa ¼ Tb
d (15) lnREC) are statistically significant at a 1% significance level. It rep-
resents that shocks in one country will affect the other countries in
the panel. The occurrence of CSD suggests that the second-
generation techniques will produce reliable, robust, efficient, and
3.3.4. Long-run elasticity estimates consistent results.
After confirming the long-run association among series, the
estimation of long-run parameters is anticipated. It includes the 4.2. Results of panel unit root tests
Mean Group (MG) estimator, Common Correlated Effects Mean
Group (CCEMG), and Augmented Mean Group (AMG) estimators After confirming the CSD, we scrutinized the stationarity of the
proposed by Eberhardt and Bond [58]. These approaches were candidate variables by implementing the second-generation sta-
applied to scrutinize concerned explanatory variables' influence on tionarity tests, namely CADF and CIPS panel unit root tests. The
economic growth and environmental functions. Furthermore, results of these tests are listed in Table 5. The outcomes of CADF and
Usman and Hammar [33] suggested two-stage constrained of the CIPS unit root tests show that lnGHG, lnFD, lnNRR, lnGLO, lnGDP,
AMG approach. Primarily, the first stage of the AMG estimator is lnNREC, and lnREC having a unit root problem at levels I (0).
explored in Eq. (16) as follows: However, all the series become stationary after taking their first
AMG (first-stage): integration order I (1) at a 1% significance level. Hence, the out-
comes of both tests verify that all the time series have first inte-
X
T
gration order I (1) because they become stationary at the first
DYit ¼ qi þ bi DXit þ pi f t þ ri DDt þ mit (16)
t¼2
difference, and it is suitable to test the long-run equilibrium among
series.
While the second stage of the AMG estimator is expressed in Eq.
(17) as follows: 4.3. Results of panel cointegration test
AMG (second-stage):
To verify the long-run equilibrium relationship among candi-
X
N
b 1 b date variables in both environment and growth functions, whether
b AMG ¼ N b i (17)
i¼1
it occurs or not, using the error correction (ECM) based cointegra-
tion test, namely, Westerlund [57] test and the results of this
where qi denotes the intercept, Xit and Yit represent the observ- method are demonstrated in Table 6. The empirical findings show
ables, f t indicates to common unobserved factor with individual that all the group (Gt and Ga) and panel (Pt and Pa) algorithms
heterogeneous aspect, D shows the operator of the first difference, significantly reject the null Hypothesis of no cointegration among
series. However, in the growth function, the Gt and Pt depict the
bb denotes the AMG mean-group estimators, and m illustrates
AMG it
significant probability values and confirm a long run cointegration
the stochastic error term.
among series. In conclusion, the findings verify a long-run associ-
Considering the presence of CSD, Usman and Makhdum [37]
ation in environment and growth functions spanning from 1990 to
recommend that the CCEMG approach fabricates reliable and
2017 in the Arctic region.
robust parameters. This approach permits the heterogeneous slope
parameter across cross-sections by introducing the average elas-
4.4. Results of long-run elasticity estimates (environment function)
ticity of specific countries. The mathematical expression of the
CCEMG approach is articulated in Eq. (18) as follows:
The results of AMG and CCEMG tests are presented in Table 7.
Xit ¼ q1i þ li Yit þ li rit þ mit (18) The coefficient of financial development has a negative and sta-
tistically significant influence on environmental degradation in the
where, li shows the individual slope of cross-section, while rt de- arctic countries. Particularly, a 1% change in financial development
notes the unobserved common static property with the incorpo- will lead to a 0.4196% decrease in greenhouse gas (GHG) emissions.
ration of li heterogeneous, and the term mit represents the Moreover, a developed financial sector of an economy promotes
stochastic inaccuracy factor. The amplified version with a mean fewer emissions level and achieve high energy-efficiency. This
cross-section of all variables mentioned above (dependent and result is similar to those found by Zaidi et al. [21], Tamazian and Rao
explanatory) is articulated in Eq. (19) as follows: [27], and Dogan and Seker [28] in contrast with Usman and
Jahanger [59]. It makes logical because Arctic economies, in
Xit ¼ q1i þ li Yit þ Ji yit þ di zit þ þhi rit þ εit (19) particular, have significantly improved in discovering new eco-
friendly technologies from the previous two decades. These econ-
omies give the impression to take advantage of advanced innova-
tion spillovers through the financial networks [60]. As recently,
4. Results and discussion Usman and Jahanger [59] argued that sound and developed
financial systems persuade technological innovation variations in
4.1. Results of panel cross-sectional dependence test the energy supply sector, leading to significantly reduced emis-
sions. Furthermore, Usman et al. [25] revealed that financial sector
At first glance, we check the CSD of the dataset because, in most development could induce greater environmental improvements.
cases, longitudinal data estimation tactics overlook the CSD and According to the report of Financing Sustainable Development
slope heterogeneity problems that may create biased estimates and (FSD) [61], Arctic economies spend more than 500 billion US$ per
ambiguous information and produce inconstant estimates. This year on Research and Development (R&D) activities, minerals, and
8
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

Table 4
Findings of cross-sectional dependence test.

Series Breusch-Pagan LM Pesaran scaled LM Bias-corrected scaled LM Pesaran CSD

Statistics. Prob. Statistics. Prob. Statistics. Prob. Statistics. Prob.

lnGHG 203.068* 0.0000 22.325* 0.0000 22.177* 0.0000 4.3219* 0.0000

lnFD 550.570* 0.0000 68.762* 0.0000 68.614* 0.0000 23.165* 0.0000
lnNRR 218.356* 0.0000 24.368* 0.0000 24.221* 0.0000 8.2894* 0.0000
lnGLO 736.103* 0.0000 93.555* 0.0000 93.407* 0.0000 27.124* 0.0000
lnGDP 642.017* 0.0000 80.982* 0.0000 80.834* 0.0000 25.067* 0.0000
lnNREC 273.618* 0.0000 31.753* 0.0000 31.605* 0.0000 6.9531* 0.0000
lnREC 411.766* 0.0000 50.213* 0.0000 50.066* 0.0000 5.0946* 0.0000

Note: * indicates the significance level at 1%.

Table 5 contains a wealth of minerals and petroleum resources. Presently,

Findings of panel stationary tests. this region produces about 1/10 of the world's oil and 1/4 of its
Series Level First Difference Integration order natural gas [64]. On the other hand, the Arctic region is putting a
CADF CIPS CADF CIPS
massive burden on its natural resource assets to meet energy de-
mand and other materials that induce environmental pressure. On
lnGHG 0.960 2.135 3.771* 6.300* I (1)
contrarily, Ahmad et al. [62] argued that resource abundance of an
lnFD 1.841 1.983 5.077* 5.241* I (1)
lnNRR 1.237 2.551 4.438* 5.560* I (1) economy facilitates countries to use more and better utilization of
lnGLO 1.575 2.821 3.614* 5.610* I (1) renewable energy sources such as natural gas and minimizes the
lnGDP 2.072 2.751 3.064* 4.044* I (1) reliance on fossil fuel imports assistance to improve the environ-
lnNREC 1.052 1.891 3.253* 5.609* I (1) mental quality. Besides, these findings recommend that the un-
lnREC 1.911 2.001 4.285* 6.101* I (1)
Critical Values 1% 5% 10% 1% 5% 10%
sustainable utilization of resources abundance in the Arctic region
3.3 2.94 2.76 3.1 2.82 2.67 is certainly high, so the governments of these countries should
design such energy policies, which minimize the dependence on
Note: * indicates the significance level at 1%.
conventional energy methods and should covert to clean and
renewable energy sources because fossil fuel uses more misrepre-
Table 6 sentation and degradation the environmental quality [30,59].
Findings of Westerlund cointegration test. The long-run elasticity of globalization (GLO) is also a positive
and significant impact on GHG emission, indicating that a 1% in-
Statistics Gt Ga Pt Pa
fluence in globalization would cause to increase of 0.3836% in
Environment function
environmental degradation. This outcome approves that global-
Values 2.298** 11.699*** 13.883** 10.710*
Z-values 1.435 0.432 3.976 0.351
ization is the chief indicator to promote environmental degrada-
P-values 0.084 0.279 0.000 0.650 tion. Besides, during the process of globalization, countries need
Robust P-values 0.018 0.071 0.030 0.001 more resources, which significantly deteriorates environmental
Economic growth function quality. Furthermore, these findings recommend that Arctic coun-
Values 2.697** 8.923 9.123* 8.040
tries need to transform eco-friendly technologies and put strict
Z-values 1.385 1.032 3.110 0.003
P-values 0.063 0.849 0.001 0.499 regulations for dirty (non-renewable) energy sourced industries,
Robust P-values 0.047 0.113 0.008 0.128 consequently controlling for environmental degradation. This
Note: *, ** & *** indicate the significance level at 1%, 5% and 10% respectively. outcome is similar to those found by You and Lv [8], Suki et al. [43],
Langnel and Amegavi [65], Pata and Caglar [66], and in contrast
with the findings of Yang and Usman [3], Zafar et al. [6], Jahanger
Table 7 et al. [7], Zaidi et al. [21], and Yang et al. [34].
Findings of long-run elasticity estimates (Environment function). Regarding the environmental effect of economic growth (GDP),
Variable MG AMG CCEMG the coefficient is significant and positively impacts the environ-
ment. More explicitly, a 1% change in GDP will lead to a rise in
Coeff. P-value Coeff. P-value Coeff. P-value
environmental degradation by 0.3088% in the longrun, which is
lnFD 0.4852* 0.003 0.4196* 0.000 0.1414*** 0.0784 significant at the 5% level. The findings suggest that Arctic econo-
lnNRR 0.0729** 0.036 0.4826** 0.012 0.9872* 0.000
mies show growth and weak environmental regulations, weak-
lnGLO 0.2863 0.983 0.3836** 0.018 0.3459*** 0.058
lnGDP 0.0922*** 0.086 0.3088* 0.002 1.5428** 0.045 ening the alliance between GDP growth and environmental
lnNREC 0.2243* 0.000 0.7071*** 0.067 0.0395 0.570 damages. The positive links allocated to obsolete/outdated tech-
lnREC 0.1494** 0.048 0.4905** 0.047 0.4247*** 0.069 nologies that economic productivity and enhance conventional
Constant 11.4906*** 0.089 12.2794*** 0.058 6.0299 0.530
energy intensity ultimately degrade environmental quality. More-
RMSE 0.0368 0.0287 0.0235
over, the primary production process of Arctic industries is based
Note: *, ** & *** indicate the significance level at 1%, 5% and 10% respectively. on more conventional energy-intensive, which ultimately increases
the economic growth without considering the environmental
quality. These results are in line with previous evidence of (Usman
energy sectors to improve the efficiency of the environment.
and Hammar [23], Usman et al. [25], Khalid et al. [45].
The outcomes display that NRR has a positive influence on
Moreover, the coefficient of non-renewable energy consump-
environmental degradation. More specifically, a 1% change in NRR
tion (NREC) is positive and significant, suggesting that NREC de-
will lead to a significant increase in the GHG emission by 0.4826% in
grades the environmental quality in the region, which enhances the
the long run. These results are in line with the findings of Ahmad
pressure on the environment. The findings reveal that a 1% increase
et al. [62] and Erdogan et al. [63], providing ground for validating
in NREC will lead to a rise in GHG emissions by 0.7071% in Arctic
the positive effect of resource abundance as the Arctic region
9
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

countries. The convectional source (obsolete technology) of energy efficient policies to better utilize natural resources due to GDP
consumption causes environmental degradation as energy is growth, which confronts ecological issues by deforestation, agri-
stimulated from non-renewables that are generally pragmatic that culture, and mining [73]. As a result, the availability of natural re-
fossil fuels produce waste material, damage public health, and sources will assist in diminishing environmental pollution, while
depletion of natural resources and produce large quantities of CO2 the scarcities of natural resources in the Arctic region have adverse
emissions, which increase the GHG emission. From these outcomes, ecological concerns. These findings are in line with the conclusion
we conclude that investment in clean energy (eco-friendly tech- of Cheng et al. [74] and Topcu et al. [75].
nology) should be regarded as a vital element of reducing GHG Moreover, the elasticity of globalization has a positive and sta-
emissions. This outcome is found parallel with previous literature tistically significant effect on economic growth in Arctic countries.
[2,15,23,31,34e37,45,51,59]. In contrast, the coefficient of REC has a Particularly, a 1% marginality in the globalization process will
negative and statically significant influence on environmental augment the economic growth of these countries by 0.2197% in the
degradation. Particularly, a 1% increase in REC would cause to long run. The positive effect of globalization can be justified in the
0.4905% decrease in GHG emissions. Several kinds of renewable sense that Arctic countries are globalized, and there operate most of
energy like biofuel, natural gas, wind, geothermal, and solar energy the multinational companies, due to foreign direct investment,
are the pathway for a cleaner environment [2,23,36,37,45,59]. tends to rise at a much greater rate than the growth in world trade,
helping enhancement technology development which ultimately
boosts economic output by making processes more efficient. This
4.5. Results of long-run elasticity estimates (economic growth
result is analogous to the existing literature of Santiago et al. [77]
function)
and Adedoyin et al. [76].
Regarding the coefficients of NREC and REC, both have a positive
The panel data estimation for the environmental function is
and statically significant effect on economic growth. Particularly, a
before deliberated in the prior section of this study. Additionally, in
1% change in NREC and REC will increase the economic growth by
the second part (Growth function), we investigate the dynamic
0.8470% and 0.1698%, respectively. Therefore, it is evident that
impact of FD, NRR, GLO, NREC, and REC on economic growth using
NREC and REC play a vital role in promoting the GDP growth pro-
the second-generation estimators, expressed in Table 8. The find-
cess in the Arctic region with the constrictions of investment and
ings depict that financial development positively influences eco-
technology in improving renewable energy substitutes. Hence, it is
nomic growth and confirm that a 1% influence in financial
necessary to reduce the share of fossil sources to reduce environ-
development will boost the GDP growth by 0.0752% in the long run.
mental degradation and the dependence on fossil sources. The
These outcomes coincide with the earlier study of Erdog an et al.
Arctic region holds a wealth of petroleum, and most economies are
[63] and Wu et al. [67]. Financial development influences GDP
based on oil and gas resources. However, these economies spend
growth through multiple channels in the case of Arctic countries.
500 billion dollars on renewable energy and research and devel-
One channel is that influences economic growth is “capital accu-
opment (R&D) projects every year. This outcome advocates that
mulation.” According to Shahbaz et al. [68], the financial sector
enhancing awareness of NREC will reduce the dependency on fossil
development can utilize national savings and absorb the same for
fuel energy resources in the Arctic region and promote the
foreign and domestic capital funds, increasing capital accumulation
accomplishment of eco-friendly (alternative) energy resources. It is
and ultimately helps in accelerating the growth process. On the
also reliable with NREC technologies creating opportunities to
other hand, Pagano [69] argued that financial development in-
boost economic growth [78]. Fig. 3 depicts the graphical repre-
creases the real GDP growth by collecting information to assess
sentation of long-run relationships of the analyzed regressors (FD,
investment projects and promote individuals to capitalize on
NRR, GLO, REC, and REC) on GHG emissions and economic growth.
higher-risk but more valuable technological innovations. Hence,
the financial sectors provide credit/loans to the enterprisers/in-
5. Conclusion and practical implications
vestors to install modern technologies, boosting economic growth.
In addition, the natural resources of an economy (NRR) have a
The main purpose of this study is to investigate the effect of
positive and significant effect on economic growth in Arctic coun-
financial development, natural resources, globalization, and non-
tries. Particularly, a 1% augmentation in NRR will boost economic
renewable and renewable energy consumption on GHG emissions
growth by 0.0752% in Arctic countries. Natural resources play a
and economic growth in the Arctic countries covering the spanning
positive role in Arctic regional development, which in turn en-
from 1990 to 2017 by employing multivariate composition ap-
hances the social labour productivity [70], spurs technological
proaches such as MG, AMG, and CCEMG estimation methods. In
development [71], and enhances industrial layout and labour di-
doing so, the current study employed second-generation panel
vision [72]. This globalized era has in progress a hasty commence
estimation approaches. Findings of the CSD tests verify that the
that can endorse a prominent impulsion for GDP growth and GHG
presence of cross-correlation (interdependence) between Arctic
emission. The governments of these countries should implement
countries. The results of the CIPS and CADF panel unit root tests
reveal that all the variables are following the stationarity process at
Table 8 their first integration order I (1). Moreover, the Westerlund coin-
Findings of long-run elasticity estimates (Economic growth function). tegration test is applied to detect the long-run relationship among
Variable MG AMG CCEMG
variables, and results confirm that all the variables follow the long-
run association in both environment and economic growth
Coeff. P-value Coeff. P-value Coeff. P-value
functions.
lnFD 0.3014* 0.000 0.0752*** 0.057 0.0542*** 0.072 The key outcomes (AMG and CCEMG) reveal that a financially
lnNRR 0.0059 0.321 0.0302** 0.034 0.0304 0.721
developed economy significantly reduces GHG emissions and in-
lnGLO 1.2206** 0.040 0.2197** 0.025 0.1275** 0.011
lnNREC 0.8021* 0.001 0.8470* 0.000 0.6343* 0.000 creases economic growth. Furthermore, natural resources and non-
lnREC 0.2982*** 0.075 0.1698* 0.001 0.3808* 0.003 renewable energy consumption are also accountable for increasing
Constant 0.7042 0.854 4.1173* 0.000 2.1171 0.290 Arctic countries' GHG emissions and economic growth. In contrast,
RMSE 0.0729 0.0330 0.0145 renewable energy use can overcome GHG emissions' overall level
Note: *, ** & *** indicate the significance level at 1%, 5% and 10% respectively. and boost economic growth in the long run. Generally, the results
10
M. Usman, A. Jahanger, M.S.A. Makhdum et al.
depict that renewable energy and financial development signifi-
cantly help to protect environmental sustainability. Other potential
factors such as natural resources, globalization, non-renewable
energy, and economic growth reduce environmental sustainabil-
ity in the long run. Moreover, all the factors such as financial
development, natural resources, globalization, non-renewable, and
renewable energy consumption significantly help boost economic
growth for Arctic countries in the long run.
The empirical outcomes recommend various important policy
implications for sustainable development in the region. The Arctic
countries mainly comprise developed (high-income) economies.
These countries should invest more in eco-friendly technologies for
their domestic energy sector to augment its efficiency and spend
more on alternative renewables to generate green and clean en-
ergy. Moreover, This region should attract clean and high-tech
foreign direct investment and promote renewable sources to
reach sustainable economic growth. Technological innovation and
usage of renewables give the impression of the most sustainable
pathway to increase the renewable energy capacity and, ultimately,
sinking environmental degradation. In addition, the Arctic region
should launch energy-efficient/saving projects to diminish the use
of energy volume since the existing energy compositions have
created significant damages to environmental quality. This con-
structs sagacity in evading excessive use of natural resources,
enhancing the green character of modern green and clean energy in
mitigation of GHG emission and sustainable economic growth.
Considering the positive impact of natural resources on GHG
emission, Arctic countries tend to shift their resources from the
agricultural to the industrial sector to endorse economic growth
and consume them efficiently to preserve environmental quality.
The high usage of natural resources should be controlled in good
governance and well-organized resource management. Since the
institution's responsibility plays a crucial role in good governance,
the central bodies of a particular economy ought to ensure
accountability and transparency for sustainable natural resource
consumption. Moreover, sustainable economic development
should be encouraged by imposing Pigovian taxes on CO2 emissions
and installing eco-friendly technologies. In general, the current
study's empirical results suggest policymakers promote sustainable
and efficient utilization of natural resources, jointly with an
increasing rate of clean and alternative renewable energy to
accomplish a better environmental quality and sustainable eco-
nomic development.
Considering the key findings of this study, governments of these
countries should design alternative and cleaner energy policies that
may assist in resolving various challenges and problems, for
instance, global warming, climate change, energy conversion, and
sustainable economic development. Initially, the power and energy
management system policies are not efficient in mitigating GHG
emissions because most Arctic countries are non-renewable en-
ergy-dependent states. For this reason, governments and central
authorities of these countries need to focus on the consumption of
cleaner and renewable resources (i.e., wind energy, geothermal
energy, hydro energy sources, biomass energy, solar energy, and
photovoltaic energy along with the adoption of energy-efficient
technologies) which may assist in reducing global warming, pro-
tecting environmental quality and carrying sustainable economic
development. In addition, cleaner and renewable energy plans have
vital repercussions in encouraging employment opportunities,
technological revolution, and regional development. The produc-
tion of renewable energy might be accomplished by balancing in-
vestment levels in R&D in the region. To continue the initiatives on
endorsing cleaner energy elucidations, it is essential to focus on
environmental awareness. Consequently, the central authorities
and government should promote the people-public-private
11
Energy 241 (2022) 122515
partnerships (PPPP) to perceive a good environmental conscious-
ness and increase the suitability of alternative energy clarifications
in the societies.
While designing the policy implications, it is also a dire
requirement to declare some caveats and assumptions. Without
considering these assumptions and caveats, these policy frame-
works might not prove to be reliable and efficient. (i) The govern-
ments of these countries should maintain import exchange and
substitution to dishearten the crude oil imports. In this regard, the
possible import duties on crude oil and petroleum-induced prod-
ucts can be steadily increased. (ii) The rule and regulations for the
protection of environmental quality should be prepared and prac-
ticed more rigorously so that the depletion of natural resources can
be reduced. (iii) While enhancing the cleaner energy sector, the
conventional fossil fuel energy production sectors will visage a
demanding strain, and as a result unemployment level might be
increased in the energy sector. To sustain the collective equilibrium,
the extra labour from the energy sector should be acknowledged
with suitable vocational and professional training, with the inten-
tion that this surplus labour can be engaged in developing a cleaner
and renewable energy sector. This can offer additional fuel to the
pattern of sustainable economic development.
In concluding remarks, the sustainable process of economic
growth is a dire requirement for every economy. However, it is not
enough circumstance to the protection of environmental quality. In
this regard, a single policy is not enough to conquer the strain on
environmental quality without affecting sustainable economic
growth. Central authorities and policymakers of all Arctic econo-
mies should implement and pursue the GHG emissions mitigation
strategies, incorporating adoption, implementation, and installing
energy-proficient and emission-free technologies in the future.
The availability of a rich dataset limited the current study, and
also, some other determinants of economic growth and GHG
emissions were not considered, such as Human capital, foreign
direct investment, trade openness, and information and commu-
nication technology (ICT). These countries should transit to clean
industry and tertiary sector. To validate this process, future studies
should explore the Environmental Kuznets Curve (EKC) and the
Pollution Halo, Heaven Hypotheses (PHHH). These hypotheses
would validate the necessity of a transition to a sustainable path.
Future research could advance on such areas, and this study also
could test the linkage of the selected variables with some other
environmental deficit indicators, i.e., natural disasters, global
warming, and the health impact of this pollution augment to
explore the accurate picture of environmental consequence due to
these candidate indicators.
Author statement
Muhammad Usman: Conceptualization, Methodology, Soft-
ware, Validation, Supervision, Formal analysis, Investigation, Re-
sults discussion, Project administration, Revised draft, and
Writingdreviewingdeditingdoriginal draft preparation. Atif
Jahanger: Data curation and Writing e review & editing.
Muhammad Sohail Amjad Makhdum: Formal analysis and
Writing e review & editing. Daniel Balsalobre-Lorente: Formal
analysis, Visualization, Interpreted results and Writing e review &
editing. Adnan Bashir: Writing e review & editing.
Declaration of competing interest
The authors declare that they have no known competing
financial interests or personal relationships that could have
appeared to influence the work reported in this paper.
M. Usman, A. Jahanger, M.S.A. Makhdum et al. Energy 241 (2022) 122515

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