Energy Strategy Reviews 41 (2022) 100855

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Energy Strategy Reviews

journal homepage: www.elsevier.com/locate/esr

Nexus between renewable energy, natural resources and carbon emissions

under the shadow of transboundary trade relationship from South East
Asian economies
Yiming Li a, Majed Alharthi b, Ishtiaq Ahmad c, Imran Hanif d, Mahmood Ul Hassan e, *
a
College of Economics and Management, Hebei Agricultural University, Baoding, Hebei, China
b
Finance Department, College of Business, King Abdulaziz University, Rabigh, 21911, P.O.BOX.344, Saudi Arabia
c
Department of Economics, The Islamia University of Bahawalpur, Bahawalpur, Pakistan
d
Department of Economics, Government College University Lahore, Lahore, Pakistan
e
Department of Statistics, Stockholm University, Stockholm, Sweden

A R T I C L E I N F O A B S T R A C T

Keywords: This study determined the influence of renewable energy and natural resources on carbon emissions by paying
Carbon emissions special attention to the transboundary trade relationship between South East Asian (SEA) economies. To high­
Energy sources: international trade light the importance of international trade relationships among the SEA economies, an interaction term is
Natural resources
introduced. Moreover, to estimate the results, panel data from 1996 to 2019 is analyzed by applying Cross-
Renewable energy
Sectional Augmented Autoregressive Distributed Lag (CS-ARDL). The results show that renewable energy con­
sumption is a significant factor that can reduce carbon emissions. The employment of interaction term shows that
international trade improves the influence of renewable energy to control carbon emissions. The findings also
depict that natural resources consumption is stimulating carbon emissions. While a strong trade bond is helping
to reduce the influence of natural resources consumption on carbon emissions. The findings of this study
highlight the importance of international trade at the regional level to mitigate carbon emissions. The study
suggests that improvement in international trade may prove a helpful strategy to promote renewable energy
sources and diminish the reliance on natural resources such as fossil fuels, this will ultimately help to mitigate
carbon emissions.

Credit author statement
Yiming Li: Theoretical and Methodological framework and tech­
nical advice. Majed Alharthi: Econometric Results Estimation, Ishtiaq
Ahmad: Diagnostic test application and interpretation of their results.
Imran Hanif (Corresponding Author Email: imran.hanif@gcu.edu.pk):
Review of literature, Data collection, and Tabulation; Mahmood Ul
Hassan: Application of statistical models and diagnostic testing.
1. Introduction
Climate change is the most discussed environmental issue
throughout the World in recent years. It is the most debated issue among
political leaders and experts in developed as well as developing coun­
tries. However, the developing countries are focusing primarily on their
growth generation policies and paying the least attention to their
growing environmental problems. This ignorance is becoming more
challenging for them, and the environmental hazard is becoming more
dangerous day by day. The increased productivity undoubtedly provides
an excellent base to their economy regarding the growth and improving
per capita income of individuals [1]. With the increase in production
and growth, carbon dioxide emissions and other greenhouse gasses are
intensifying in the atmosphere. About more than 60% of the atmosphere
is exaggerated by carbon dioxide gas [2]. In the last few decades, the
developing economies of the World have risen their economic growth
rapidly. In the process of rapid growth, the contribution of the energy
sector is found remarkable. Energy is considered the “oxygen” for
developing economies as it gives life to their economic activities [3].
Like other regions, the developing Southeast Asian countries have
gained significant momentum in their economic growth and their level

* Corresponding author.
E-mail addresses: liyiming046269@163.com (Y. Li), mdalharthi@kau.edu.sa (M. Alharthi), ishtiaq.ahmad@iub.edu.pk (I. Ahmad), imran.hanif@gcu.edu.pk
(I. Hanif), scenic555@gmail.com (M. Ul Hassan).

https://doi.org/10.1016/j.esr.2022.100855
Received 7 January 2022; Received in revised form 20 April 2022; Accepted 3 May 2022
Available online 14 May 2022
2211-467X/© 2022 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Y. Li et al.
of energy consumption has also risen. The energy demand has increased
80% since 2000, which is met by doubling non-renewable energy con­
sumption, rising carbon dioxide emissions, and environmental hazards
[4].
If viewed candidly, we know that the larger energy consumer and
growth economies like China, Mongolia, Malaysia, and Thailand have a
greater environmental pollution level. China had 7.17, Malaysia 8.09,
and Thailand 4.11 metric tons per capita CO2 emissions in 2016.
Mongolia had 15.13 metric tons per capita carbon dioxide emissions in
2013, recording its all-time highest emissions of carbon dioxide gas.
However, recorded 8.30 metric tons per capita CO2 emissions in 2016
still proves Mongolia as the largest CO2 emitter in the Asian region. It is
important to mention that during the period 1990–2012, the carbon
intensity of Mongolia has been observed 15 times the world average for
the urge of a 147% improvement in the Gross Domestic Product (GDP).
Meanwhile, the share of Mongolia’s energy sector to carbon emission
was observed at 25% (World Development Indicators, 2020). In Fig. 1,
the carbon dioxide emissions graph of SEA economies indicates the rise
in carbon emissions in 2016 compared to five years back in 2012 in all
countries except China and the Solomon Islands, which have shown
slight betterment in their environment. However, Mongolia has attained
outstanding achievement in environmental protection and shown a
comprehensive reduction in its emissions of carbon dioxide gas. The
primary reason behind this change is the gain in energy efficiency due to
changes in lifestyle, technological development, use of hybrid fuel-
efficient vehicles, and social awareness about the renewable energy
sources to meet energy and heating demand at commercial and house­
hold levels [5]. But still, there is a need for much attention regarding
their environmental condition as it is still recognized as the largest
emitter of carbon dioxide gas in the Southeast Asian region. (World
Development Indicators, 2020).
Since the end of the twentieth century, economic integration in the
form of international trade has played important role in the develop­
ment of research and technology, market liberalization, and access to
the international market, as a result, the SEA region has emerged as a
global trade hub. In short, it emerged as one of the World’s fastest-
growing economic regions [6]. Although the surge of global trade hel­
ped the promotion of clean renewable energy sources, despite that the
excess demand for non-renewable energy is a continuous threat to
achieving environmentally friendly economic growth. That is why the
Fig. 1. Comparison of carbon dioxide emissions in 2012 and 2016.
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Energy Strategy Reviews 41 (2022) 100855
developing SEA economies have signaled the adaptation of renewable
energy installation to reduce carbon emissions and achieve
socio-economic and environmental benefits. In nutshell, the promotion
of cleaner energy has become the dire need of the region to attain the
sustainable environment targets set under the Paris Climate Agreement
COP-21 presented in 2015 [7].
This study hypothesized that a strong trade bond between the SEA
countries may helpful for renewables’ deployment in their power,
heating, cooling, and transport sectors to achieve the 23% share of re­
newables in total energy consumption at the regional level [6]. Some
Southeast Asian countries like Cambodia, Lao PDR, Myanmar, Papua
New Guinea, and the Solomon Islands have been the leading consumers
of renewable energy during the period from 2012 to 2016 (World
Development Indicators, 2020). Fig. 2 shows the average (2012–2016)
value of renewable energy consumption in developing SEA countries. It
can be observed that Myanmar is recorded as the largest renewable
energy consumer with an average value of 67.33% over the previous five
years. However, Cambodia 67.09%, Solomon Islands 63.35%, and Lao
PDR 60.60% average consumption of renewable energy in the last five
years. Despite that, the SEA region is still under the constraint of high
energy demand, and renewable energy has a significant shortfall to meet
the rising energy demand in the region. For example, China has been the
largest energy consumer in the world, and its primary energy demand
would achieve 4800 million tons of coal equivalent by 2020 [8]. The
graph shows that almost every SEA country has a better adaptation of
renewable energy except Malaysia and Mongolia. Furthermore, it will be
interesting to see the long-run impact of renewable energy consumption
and international trade on carbon dioxide emissions in the SEA region.
The present study also considered the reliance on natural resources
as an important factor to meet energy demand and the surge of envi­
ronmental issues in the SEA region. For instance, the SEA region holds
about 25% of the world’s coal reserves [9]. Likewise, Malaysia is
considered the leading natural resource adopted country, and its ranking
is 26th in the World Energy Trilemma index as it is famous for its
forestry and oil reserves [9]. However, Cambodia, Lao PDR, Myanmar,
Papua New Guinea, Solomon Islands, and Vietnam have plenty of forest
resources and have a more generous contribution to their economic
growth. Even Solomon Islands forest rents are 18.48% of its GDP in
2016, which is considered a generous contribution to its economy.
Moreover, Indonesia, Malaysia, Papua New Guinea, and Vietnam are
Y. Li et al.
Fig. 2. Average consumption of renewable energy from 2012 to 2016.
famous for their oil resources. Mongolia is renowned for its coal re­
sources and has exceptional support to its economy by these natural
resource rents (World Development Indicators, 2020). The Southeast
Asian region has plentiful natural resources, and their rents have more
significant support for these developing economies. However, environ­
mental protection is also under consideration in this region, and it is
only possible with the sustainable use of these natural resources and
their rents. Though, Fig. 3 shows the total natural resource rents aver­
ages for the last five years (2012–2016). It can be observed that
Mongolia, Myanmar, and the Solomon Islands have above 20% of total
natural resource rents averages and demonstrate outstanding support to
their economy. Besides, environmental protection still needs attention
and demands sustainability. So, it will be exciting to examine the indi­
vidual and total natural resource rent effects on the environmental
conditions of SEA countries.
Understandably, the developing SEA economies are well aware of
modern times need to stand with global countries. However, without
advancements in research and technology and sustainable utilization of
Fig. 3. Average natural resources rent from 2012 to 2016.
3
Energy Strategy Reviews 41 (2022) 100855
energy and natural resource rents, environmental cleanliness is impos­
sible. More importantly, this study also highlights that the countries
with strong international trade relations may implement environmental
policies in a better way as compared to the economies with a weaker
trade relationship with other countries. So, the study’s first objective is
to examine the influence of renewable energy and natural resource rents
on the environmental conditions of Southeast Asian countries. It will
also be helpful to investigate the outcome of the adaptation of renewable
energy in Southeast Asian countries. The second objective of the study is
to highlight the role of international trade to control carbon emissions.
This relationship is not straightforward, therefore to achieve this
objective an interaction term consisting of renewable energy and in­
ternational trade is introduced and analyzed. The third objective is to
determine the role of natural resource types on carbon emissions in
Southeast Asian countries. To estimate the robust results, the study
applied a second-generation econometric model and analyzed panel
data of fifteen emerging southeast Asian economies. The study high­
lights that renewable energy and a strong trade relationship are key
Y. Li et al.
factors to control carbon emissions in the economies under question.
The rest of the study is composed as follows;
The review of literature is presented in section 2; Data sources,
theoretical framework, and methodology are presented in section 3;
results are estimated and discussed in section 4, and the conclusion is
given in section 5.
2. Literature review
Despite many attempts to understand the effect of economic growth,
renewable energy, and natural resource rents on carbon dioxide emis­
sions, no strong agreement has arisen. This is attributable to differences
in methodological methods, specification of an econometric model, the
essential factors, econometric techniques, and data. Environmental
protection is the general issue of the world in this modern time. It is
considered a big challenge for the world’s economies to keep the envi­
ronment protected in the high racing time of economic growth. Almost
every country globally is blessed with natural resources, a fruitful source
to stabilize their economies. The developing economies have been
brought into being resource-abundant and get high returns, which in­
fluences their economic growth. However, the mismanagement and high
abundance of natural resource rents are not environmentally friendly
and resultantly damage the global environment. The industrialized
economies are more indulged in coal, gas, and oil energy resources,
mainly blamable for environmental degradation [10]. Countries of
natural resource abundance such as coal, gas, and oil are confined by the
“resource curse” phenomenon. The economies facing the resource curse
have environmental issues such as carbon dioxide emissions [11–15]. In
sixteen European countries, the long-run and causal effects of natural
resource rent and economic growth on carbon dioxide emissions have
been established. The empirical results suggest that natural resource
rent and carbon dioxide emission has positive linkages [16]. However,
Wang et al. [17] examined the direct and indirect effects of natural
resource abundance on carbon emissions efficiency. The results are
showing that natural resource abundance adversely affects carbon
emissions efficiency. Badeeb et al. [18] studied the natural resource
rents and Environmental Kuznets Curve (EKC) in Malaysia’s
resource-based economy. The long-run results of Fully Modified Ordi­
nary Least Square (FMOLS) confirmed the early stage and inverted
U-shaped EKC hypothesis in Malaysia. The results elaborated that nat­
ural resource dependence harms carbon dioxide emissions in the long
run.
In G7 countries, economic growth and total natural resource rents
have enhanced carbon dioxide gas’s secretions and degraded the envi­
ronment in the long run. It is obtained that the countries are failed to
maintain their environmental cleanliness at the early stages. Simulta­
neously, the enhanced economic growth succeeded in controlling the
carbon dioxide emissions at the later stage and proposed the EKC
inverted U formed hypothesis in Sub-Saharan African countries [19].
Wang et al. [20] studied that the total natural resource rents and eco­
nomic globalization have triggered the carbon dioxide emissions in G7
countries in the short and long run. Chien et al. [21] depicted the role of
renewable energy, economic growth, and urban expansion on green­
house gasses in a cross-section of ten Asian countries. The employed
CS-ARDL results highlighted that renewable energy and GDP-square are
key indicators to control carbon emissions in the region. However,
Ahmed et al. (2020) in twenty-two emerging countries find that eco­
nomic growth and natural resource rents have increased the ecological
footprint. In the second carbon footprint model, environmental degra­
dation is prompted by enhanced economic growth, natural resource
rents, and urbanization in the long run.
Solarin [22] investigates the relationship between environmental
degradation and resource rent, and findings suggest that environmental
degradation and resource rent has a positive association in developing
countries. At the provincial level in China, green investment and natural
resource rents are observed to mitigate carbon dioxide emissions to meet
4
Energy Strategy Reviews 41 (2022) 100855
the clean environment target of sustainable development. The natural
resource rents have augmented the carbon dioxide emissions in thirty
provinces of China (Shen et al., 2020). In Organization of Economic
Co-operation and Development (OECD) countries, the extraction of
natural resources leads to increase carbon dioxide emissions. In
ecological footprint and carbon footprint, the role of natural resource
rents is insignificant [23]. Guan et al. [24] examined the relationship
between financial development and natural resources rents in the
presence of globalization in China. The findings confirm the resource
curse hypothesis in the presence of economic growth, human capital,
and globalization. The study suggests the need for globalization and the
development of human capital for the efficient use of natural resources
in China. Su et al. [25] examined the relationship between geopolitical
risks and renewable energy through a rolling window method. The re­
sults show a bidirectional causality between renewable energy and
geopolitical risks in different sub-samples. The study highlights the
importance of geopolitical risks for the development of renewable en­
ergy. Caglar et al. [26] also highlights the importance of partnerships
investment in energy and economic complexity around the globe by
analyzing yearly data of BRICS nations. The findings spotlighted that
economic complexity along with a positive change in trade openness
improved environmental quality in the economies under question.
While the findings showed that a public-private partnership stimulates
environmental pollution in selected countries.
Salim and Rafiq [27] have confirmed the association between
renewable energy consumption and carbon dioxide emissions in six
emerging countries. Renewable energy is found significant to cause
carbon dioxide emissions. In OECD countries, renewable energy has
mitigated carbon dioxide emissions and supports the EKC hypothesis
[28]. In the European Union (EU) countries, renewable energy is
favorable for sustainable growth and environmental protection [29]. In
a large panel of eighty-five developed and developing economies,
renewable energy consumption facilitated stable economic growth and
mitigated carbon dioxide emissions [30]. In evidence of forty-two
developing economies, renewable energy consumption improved the
environmental quality by reducing CO2 emissions [31]. Sinha and
Shahbaz [32] supposed that renewable energy and carbon dioxide
emissions have a negative relationship, also found Environmental Kuz­
nets Curve to be U-Shaped for India. Chen and Lei [33] discussed that
renewable energy consumption mitigates carbon dioxide emissions. On
the other hand, an increase in renewable energy boosts the economic
growth in the thirty global countries. In European countries, renewable
energy consumption originated improvement in environmental quality
[34]. Acheampong et al. [35] found that renewable energy mitigates the
carbon dioxide emissions in Sub-Saharan Africa. While economic
growth upsurges the environmental quality, manifest the existence of
the Environmental Kuznets curve hypothesis. Belaid and Zrelli [36]
examined a causal relationship between both types of energy con­
sumption, GDP, and carbon dioxide emissions. Suggests that an increase
in renewable energy sources is a feasible strategy to reduce carbon di­
oxide emissions. Caglar et al. [37] determined the influence of renew­
able and nonrenewable energy, financial development, and information
and communication technologies in the top ten polluted countries of the
World. The findings of Panel ARDL showed that information and
communication technologies, financial development, and renewable
energy are significant indicators to control carbon emissions, while
nonrenewable energy consumption stimulates the environmental chal­
lenges in the sample countries.
Cheng et al. [38] depicted the positive role of renewables to control
carbon emissions in the OECD economies. The study findings also
confirmed the U-Shaped association between economic growth and
carbon emissions for the sample countries. In support of renewable en­
ergy Xu and Buyya [39] described that it has lessened about 40% carbon
emissions in Dublin, California, and Virginia. Adams and Nsiah [40]
spotlighted the insignificant influence of renewable energy and eco­
nomic progress on environmental pollution for a long-run period in the
Y. Li et al. Energy Strategy Reviews 41 (2022) 100855

selected African countries. Nathaniel and Iheonu [41] also showed an Table 1
insignificant relationship between renewable energy and carbon emis­ Variables and sources.
sions in a cross-section of nineteen nations by applying the Augmented Variables Variables Description Sources
Mean Group method.
CO2 Carbon dioxide emissions (CO2 https://databank.worldbank.
Mert et al. [42] examined the role of economic growth, foreign direct emissions metric tons per capita) org/source/world-develo
investment, renewable and nonrenewable energy on carbon emissions in pment-indicators#advancedDo
the European Union nations by investigating unbalanced panel data. wnloadOptions
Their findings revealed that renewable energy is a significant source to GDP Economic Growth (GDP growth https://databank.worldbank.
annual %) org/source/world-develo
control carbon emissions, and also validate the U-Shaped relationship pment-indicators#advancedDo
between economic growth and carbon emissions, these results also wnloadOptions
endorsed the findings of Caglar [43]. Mert and Caglar [44] determined GDP2 Square of Economic Growth (GDP https://databank.worldbank.
the asymmetric long-run and short-run causal association between car­ growth annual %)2 org/source/world-develo
pment-indicators#advancedDo
bon emissions and foreign direct investment in Turkey by employing the
wnloadOptions
hidden cointegration method. Their findings depicted an asymmetric REC Renewable energy consumption https://databank.worldbank.
causal association among the positives shocks in foreign direct invest­ (% of total final energy org/source/world-develo
ment and carbon emissions movements in the long as well as short-run consumption) pment-indicators#advancedDo
periods. Caglar et al. [45] investigated the influence of renewable en­ wnloadOptions
ITR Strength of International Trade https://databank.worldbank.
ergy, natural resources, and biocapacity on the ecological footprints by Relationship measured in terms of org/source/world-develo
following the EKC framework for the USA. The findings confirmed the Exports (% of GDP) pment-indicators#advancedDo
positive role of renewable energy to control carbon emissions while wnloadOptions
biocapacity and economic growth exerted an adverse impact on carbon CLR Coal Rents (% of GDP) https://databank.worldbank.
org/source/world-develo
emissions and advocate the finding of Sharif et al. [46].
pment-indicators#advancedDo
After reviewing the literature, we identify that developing countries wnloadOptions
are facing environmental issues, and the promotion of renewable energy FOR Forest Rents (% of GDP) https://databank.worldbank.
also seems challenging for such economies. Furthermore, the literature org/source/world-develo
highlights that renewable energy is a solitary source to control carbon pment-indicators#advancedDo
wnloadOptions
dioxide emissions and promote environmental quality. Although the
TNR Total natural resource rents (% of https://databank.worldbank.
developing economies have been indulging in non-renewable energy for GDP) org/source/world-develo
decades, it is too early to expect some extraordinary from renewable pment-indicators#advancedDo
energy resources. However, some of the evidence has not shown the wnloadOptions
significant influence of renewable energy on environmental conditions.
In the case of SEA countries, the literature lacks evidence to confirm the
environmental quality is prioritized while achieving the desired level of
consequences of natural resource rents and renewable energy on their
economic growth refers to the turning point threshold (Sinha and
environmental protection. Particularly the literature provides very
Shahbaz 2019; [19]. The desired level of economic growth, referred to
limited information about the role of international trade to promote
as squared economic growth, leads to a reduction in carbon dioxide
renewable energy and control environmental degradation. In short, the
emissions, holding the EKC inverted U-shaped hypothesis [48]. In the
promotion of renewable energy seems challenging in economies with an
technique effect stage, the countries are admired for adopting renewable
abundance of natural resources. Therefore, the present study bridges the
energy to mitigate carbon dioxide emissions and improve environmental
literature gap by considering developing SEA economies as an important
quality. This study extends this theoretical framework by considering
cross-section and highlighting the role of international trade along with
cross-border trade as an important factor to promote renewable energy
renewable energy to mitigate carbon emissions. Further, the research
at a regional level. Therefore, this research has taken renewable energy
will test the EKC hypothesis of both U-shaped and Inverted U-shaped for
consumption along with international trade relationships, and natural
SEA economies.
resource rents as important factors to mitigate carbon dioxide emissions.
Econometric Model: The theoretical model directs the EKC hypoth­
3. Data and methodology eses of both types, EKC U-shaped and Inverted U-shaped hypothesis. The
econometric model requires examining the effect of renewable energy
Data Sources and Variable Descriptions: In emphasizing the effects consumption, economic growth, and natural resource rents on carbon
of renewable energy consumption, international trade, and natural dioxide emissions in Southeast Asian emerging economies to detect the
resource rents on carbon dioxide emissions, the data is occupied from EKC hypotheses. However, the econometric model’s functional form is
1996 to 2019. The SEA emerging countries are chosen based on income given below:
levels. The fifteen emerging SEA economies are Cambodia, China, Fiji, ( )
Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, Papua New Guinea, CO2 i,t = f GDPi, t , GDP2i,t , RECi,t , ITRi,t , CLRi,t , FORi,t , TNRi,t (1)
Philippines, Samoa, Solomon Islands, Thailand, Vanuatu, and Vietnam.
The data of these SEA economies are taken from World Bank data In the above functional form equation (1), carbon dioxide emissions
sources. The variable names, descriptions, and data sources are given in as a dependent variable are the function of independent variables such
Table 1. as economic growth, squared economic growth, renewable energy
Theoretical Model: Kuznets [47] developed the Environmental consumption, the strength of international trade relation, total natural
Kuznets Curve (EKC) hypothesis, based on two steps: EKC U-shaped and resource rents, and individual natural resource rents (coal, forest, and
EKC Inverted U-shaped hypothesis. Three effects perceive these two natural resource rents).
steps; the scale effect, composite effect, and technique effect. There is The econometric equation based on Su et al. [7]; Adedoyin et al.
much focus on initial development in the early premise of scale effect [19]; Badeeb et al. [18]; and Danish et al. [49] is given below:
rather than environmental quality. In scale effect, economic growth and
CO2it ​ = ​ β0 ​ + ​ β1 GDPit ​ + ​ β2 GDP2 it ​ + ​ β3 RECit ​ + ​ β4 ITRit ​
carbon dioxide emissions have a positive association, leading to the EKC
U-shaped hypothesis. In composite effect, the emphasis is on industri­ + ​ β5 (RECit ​ ∗ ​ ITRit ​ ) + β6CLRit ​ + ​ β7 FORit ​ + ​ β8 TNRit ​ + ​ μi
alization to promote economic growth and some concern for environ­ (2)
mental quality conservation. In the third path of technique effect, better

5
Y. Li et al. Energy Strategy Reviews 41 (2022) 100855

Equation (2) is established as an econometric model to determine the Here, N specifies the number of cross-sections and ‘t’ indicates time
influence of economic growth, renewable energy consumption, inter­ measurement.
national trade relationship, natural resource rents on carbon dioxide Panel Cointegration Test with CD: In the presence of cross-sectional
emission in Southeast Asian economies. However, β0 is the intercept, dependence, the next procedure is to examine the slope heterogeneity
and β′ s = 1 …. 8 is the slope of the econometric model, while μi is the and for this purpose, a test proposed by Pesaran and Yamagata [52] is
error term in the model. applied. The acceptance of the null hypothesis represents the slope ho­
mogeneity while the alternative hypothesis indicates the parameters
with heterogeneous slope. The study also applied crucial cointegration
3.1. Methodology tests proposed by Westerlund [53] and Banerjee and Carrion-i-Silvestre
[54] to examine the long-run relationship between dependent and set of
Cross-section Dependence (CD): The CD test by Pesaran (2004) es­ independent variables. The primary reason to apply the Westerlund Test
tablishes to examine the cross-sectional dependence in the model. The of Cointegration is that it takes into account the structural dynamics of
cross-sectional dependence test consists of null hypothesis refers to no the data and is based on Error Correction Model. Banerjee and
cross-sectional dependence, and alternative hypothesis, indicating Carrion-i-Silvestre test have the tendency to cope with heterogeneous
cross-sectional dependence in the model. The CD test equations are as slope coefficients, weak and strong CD issues, and unit root problems.
follow: CS-ARDL: This study applied Cross-sectional Augmented Autore­
( )1/2 gressive Distributed Lag Model (CS-ARDL) to estimate the robust long-
TN(N − 1)
(3) run and short-run impact of renewable energy, international trade,
′
CD = P
2
and natural resources rent on carbon emissions. This econometric
( )∑ method provides the best results in the presence of endogeneity, cross-
2 N− 1 ∑N
(4) sectional dependence, and heterogeneous slope coefficients. The CS-
′
P = ′
N(N − 1) i− 1 j = i + 1P ij
ARDL specification based on a functional form given in equation (1)
Here in the above equations of the CD test, N denotes the cross- can be presented as:
sections and T time dimensions. However, P ij is the pairwise correla­
′

tion coefficient for cross-sectional residuals.

ΔCO2i,t =
∑ΔCO2 ∑ΔRNE ∑ΔITR ∑
ΔRNE*ITR

i=0
π 1, it CO2i, t− 1 + i=0
π2, it RNEit− 1 + i=0
π3, it ITRit− 1 π4, it RNE*ITRit− 1 + (7)
i=0
∑ΔCLR ∑ΔFOR ∑ΔTNR ∑ΔZ
i=0
π5, it CLRit− 1 + i=0
π6, it FORit− 1 + i=0
π7, it TNRit− 1 + i=0
π8, it Z t− 1 + εit

Panel Unit Root Test with CD: Following Im, Pesaran, and Shin [50]
and Pesaran and Timmermann [51]; this research has applied the
Cross-section Augmented Im-Pesaran-Shin (CIPS) panel unit root test.
CIPS unit root is the addition of the Cross-section Augmented
Dickey-Fuller (CADF) panel unit root test and can be presented as:
Here, the lag of each variable presented with ΔCO2 , ΔRNE, ΔITR, Δ
RNE, Δ(ITR *CLR),ΔFOR,ΔTNR and ΔZ. The Zt− 1 is the mean value of all
variables and can be presented as:
( )
Z t− 1 = CO2 it− 1 , RNEit− 1 , ITRit− 1 , (RNE*ITR)it− 1 , CLRit− 1 , FORit− 1 , TNRit− 1

p p
(8)
∑ ∑
ΔZi,t = φi + φi Zit− 1 + φi Z t− 1 + φit ΔZi, t− 1 + φi,t ΔZ t− 1 + εit (5) The above procedure is known as Common Correlation Effect Mean
i=1 i=0
Group (CCEMG). While the long-run estimates based on CS-ARDL can be
Here, Δ indicates the first difference, while Zt− 1 and ΔZt− 1 denote the presented as:
average of lagged and first difference respectively. The CIPS consists of ∑ΔRNE
i=0 ̂π 1, it
H0: βi = 0 for all i and H1:βi < 0 for some i to designate the stationarity ω
̂ CSARDL = ( ∑ΔRNE )
among variables. CIPS unit root equation is given below: − 1− i=0 ̂ π 1, it
∑N The short-run estimates based on CS-ARDL can be estimated with the
CIPS ​ = ​ N − 1 CADFi (6)
i− 1 help of the following equation.

∑ΔCO2 − 1 ∑ΔRNE
ΔCO2i,t = π0 (CO2it− 1 − πi RNEit− 1 ) − i=0
π1.it ΔCO2i,t− 1 + i=0
π2.it ΔRNEit− 1 −
∑ΔCO2 − 1 ∑ΔITR ∑ΔCO2 − 1
i=0
π3.it ΔCO2i,t− 1 + i=0
π4.it ΔITRit− 1 − i=0
π5.it ΔCO2i,t− 1 +
∑Δ(RNE*ITR) ∑ΔCO2 − 1 ∑ΔCLR
π6.it Δ(RNE*ITR)it− 1 − π 7.it ΔCO2i,t− 1 + π 8.it ΔCLRit− 1 − (9)
i=0 i=0 i=0
∑ΔCO2 − 1 ∑ΔFOR ∑ΔCO2 − 1
i=0
π9.it ΔCO2i,t− 1 + i=0
π10 1.it ΔFORit− 1 − i=0
π11.it ΔCO2i,t− 1 +
∑ΔTNR ∑ΔZ
i=0
π12.it TNRit− 1 + i=0
π13.it Z t− 1 + εit

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Y. Li et al. Energy Strategy Reviews 41 (2022) 100855

Table 2
Descriptive statistics.
CO2 GDP GDP2 REC ITR CLR FOR TNR

Mean 1.950 5.182 44.089 43.356 19.763 0.609 2.701 8.209

Median 0.932 5.661 33.506 42.977 0.234 0.0139 1.021 5.383
Std. Dev. 2.343 4.157 44.479 24.126 6.596 2.204 3.874 8.978
Skewness 2.034 − 0.870 2.011 − 0.017 2.086 7.354 3.125 1.689

variation from its mean point. While squared GDP 44.479 and renewable
Table 3
energy consumption 24.126 have a high deviation from their mean
Results of cross-sectional dependence test.
points. Skewness examines the direction of variables. Almost all of the
Variables Name Statistic of CD Test Prob. indicators are positively skewed except, GDPGR and REC have an
GDP 9.761*** 0.000 opposing direction from their mean points. After this, cross-sectional
GDP2 7.654*** 0.000 dependence has been examined, which is proposed by Pesaran [55].
REC 10.006*** 0.000
In Table 3, the Pesaran [55] Cross-sectional dependence test statis­
ITR 8.873*** 0.000
CLR 4.981*** 0.000 tics are significant for all variables, which is rejecting the null hypothesis
FOR 11.553*** 0.000 at a 1% level of significance and showing the dependence among the
TNR 6.718*** 0.000 selected SEA economies. In the next step, a test proposed by Pesaran and
Set of Independent Variables 19.932*** 0.000 Yamagata [52] to examine the homogeneity in the slop of parameters is
Note: ***, represents a 1% level of significance, respectively. performed. The null hypothesis of the test advocates the homogenous
Note: Ho: No Cross-section Dependence. slope parameters, while the alternative hypothesis suggests the hetero­
Ha: There is Cross-section Dependence. geneous slope of the parameters.
The result in Table 4, shows the significant p-values that depict the
rejection of the null hypothesis at a 1% level of significance, and confirm
Table 4 the slopes of parameters are heterogeneous. Thus, the results are given
Results of slop homogeneity test.
in Tables 2 and 3 highlight the issues of cross-sectional dependence and
Dependent Variable = Carbon Emission (CO2) slope heterogeneity, therefore to tackle those issues, the present study
Statistics Test value P-value applied a Cross-sectional Im Pesaran and Shin (CIPS) unit root test to
examine the stationarity level of data series.
Delta Tilde 17.329*** (0.000)
Delta Tilde (Adjusted) 13.001*** (0.000) Table 5 reveals the results of the CIPS unit root test proposed by Im,
Pesaran, and Shin [50] and Pesaran and Timmermann [51]. CIPS con­
Note: ***, represents a 1% level of significance, respectively.
sists of constant, trend, and constant values to measure variables’ inte­
Note: Ho: Slope Homogeneity.
gration at level or first difference. The CIPS unit root findings have
Ha: Slope Heterogeneity.
inferred that CO2, GDP, REC, ITR, CLR, FOR, and TNR are stationary at
first order when examined with constant, and with the trend and con­
stant specifications. Thus, there is no variable integrated at a level I (0),
which leads to the order of integration among all variables at I (1). In the
Here equation (9) shows the specification used to estimate the short-
next step cointegration test proposed by Westerlund [53] and Banerjee
run results based on CS-ARDL. The empirical results based on CS-ARDL
and Carrion-i-Silvestre [54] are applied to examine the cointegration or
are estimated and interpreted in the next section.
long-run relationship between carbon emission and a set of independent
variables. The null hypotheses of both tests advocate the absence of a
4. Results and discussion cointegration relationship, while alternative hypotheses suggest the
cointegration or long-run association between the dependent and a set of
The empirical analysis begins with descriptive statistics to prove that independent variables.
the panel data is statistically up to the mark. Table 6 shows the results of Westerlund [53]; and Banerjee and
In Table 2, descriptive statistics disclose that renewable energy has Carrion-i-Silvestre [54] test for Cointegration. The results of Westerlund
the highest mean value, 43.356, which indicates that renewable energy are given on the basis of group statistics and panel statistics. Both
is the most commonly used energy type in Southeast Asian countries. specifications rejected the null hypothesis at a 1% level of significance
However, the individual natural resources such as coal and forest re­
sources are the least disposable than total natural resource rents of
8.209. The standard deviation shows that every indicator has some Table 6
Westerlund [53] and Banerjee and Carrion-i-Silvestre [54] tests for
Cointegration.
Table 5
CIPS panel unit root test. Westerlund Error Correction Cointegration Test (Dependent Variable = CO2)

Variables At Level At 1st Difference Integration Dependent Group Statistic Panel Statistic
Order Variable Gt Ga Pt Pa
Constant Trend & Constant Trend & CO2
Constant Constant Test Statistic − 6.432*** − 11.888*** − 12.732*** − 14.624***
CO2 − 0.467 − 1.315 − 3.582*** − 4.306*** I (1) P-Value 0.000 0.000 0.000 0.000
GDP − 2.018 − 2.417 − 5.196*** − 5.203*** I (1) Banerjee and Carrion-i-Silvestre Cointegration Test (Dependent Variable = CO2)
REC − 1.700 − 2.007 − 4.088*** − 4.307*** I (1) Full Sample No Deterministic With With Trend
ITR − 0.043 − 0.375 − 2.694*** − 2.750* I (1) Specification Constant
CLR − 0.566 − 0.994 − 2.570*** − 2.873** I (1)
FOR − 1.540 − 1.844 − 4.645*** − 4.790*** I (1) Test Statistic − 4.089*** − 4.127*** − 4.006***
TNR − 1.221 − 1.646 − 4.192*** − 4.274*** I (1)
Note: ***, represents a 1% level of significance, respectively.
Note: ***, ** and * represents a 1%, 5% and 10% level of significance, Note: Ho: No cointegration.
respectively. Ha: All panels are cointegrated.

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Y. Li et al. Energy Strategy Reviews 41 (2022) 100855

Table 7 that the new renewable energy projects or increase in the share of
CS-ARDL results. renewable energy in total energy consumption will be fruitful for SEA
Dependent Variable CO2 economies and favorable to achieve the sustainable development goals
till 2030 [6].
Variables Coefficients Standard Error t-statistics
The results also show the impact of international trade on carbon
Long Run Estimates Based on CS-ARDL emissions. The CS-ARDL results revealed a negative and statistically
GDP 0.522*** 0.232 2.251 significant relationship between international trade and carbon emis­
GDP2 − 0.137* 0.078 − 1.756 sions. According to the results, improvement in international trade has
REC − 0.456** 0.241 − 1.892
the potential to reduce carbon emissions in the SER region. The rela­
ITR − 0.238* 0.133 − 1.789
REC*ITR − 0.682*** 0.241 − 2.829 tionship is very straightforward; as international trade is a key factor for
CLR 1.263* 0.736 1.716 the promotion of technology in the region. However, the present study
FOR 0.194** 0.101 1.921 introduced the interaction term to highlights the new aspect of inter­
TNR 1.732*** 0.759 2.281 national trade and that is the promotion of renewable energy. The re­
Short Run Estimates Based on CS-ARDL
sults depict the negative coefficient of interaction term and highlight
GDP 0.284** 0.139 2.043 that international trade along with renewable energy has the potential
GDP2 − 0.026 0.016 − 1.625
to reduce carbon emissions. This also spotlight that international trade
REC − 0.194 0.121 − 1.603
ITR − 0.187* 0.107 − 1.747 may prove helpful for the promotion of renewable energy. The promo­
REC*ITR − 0.165** 0.088 − 1.875 tion of renewable energy is a primary challenge for the developing SEA
CLR 0.893 0.564 1.583 economies and results of the interaction term indicate that international
FOR 0.213** 0.114 1.868
trade is a significant factor for the promotion of renewable energy at the
TNR 0.731*** 0.285 2.833
ECM (t-1) − 0.193*** 0.067 − 2.881
regional level.
The results regarding natural resource rents indicate that coal (CR) as
Note: ***, ** and * represents a 1%, 5% and 10% level of significance, a form of natural resource rents carried a positive sign, this indicates that
respectively.
the consumption of coal in the region is a significant source of carbon
emissions. According to the results, a 1% increase in colas rent will
and confirm the cointegration or long-run association between carbon promote the consumption of coal, and this could lead to about a 1.23%
emissions and the dependent variables. The Banerjee and increase in carbon emissions. The desire to earn rent from coal resources
Carrion-i-Silvestre test was applied on the full sample and the results encourages coal-based energy production, which directs to carbon di­
reject the null hypothesis and confirm the presence of cointegration. The oxide emissions in Southeast Asian economies. According to World En­
country-wise results are given in Appendix 1. ergy Council [9]; about 25% of coal reserves are existing in the SEA
Table 7 shows the CS-ARDL based long-run impact of renewable region. In the past, the reliance of industrialized economies on coal
energy, international trade, natural resource rents, and economic energy resources has been deteriorating the environmental quality at the
growth on carbon emissions in developing SEA countries. The findings global level [10]; Hanif [58]. The excessive use of coal resources and
of CS-ARDL validate the U-shaped EKC hypothesis between economic revenues generated has declined environmental protection. However,
growth and carbon dioxide emissions in the SEA region. The results have the Southeast Asian countries are famous for their forest resources and
revealed that economic growth (GDP) positively influences carbon di­ generated high revenues from these resources [9]. The findings revealed
oxide emissions (CO2). GDP coefficient values of 0.522 are statistically that the addition in forest rent could be a significant source of excessive
significant at a 1% level of significance. This highlights that an increase use of such forests and may lead to carbon dioxide emissions in the long
in economic growth stimulates carbon dioxide emissions, and degrades run. The results show that a one percent increase in rent from forest
the environmental quality in developing SEA economies. The results resources may lead to a 0.19% addition in carbon dioxide emissions in
further show that the square term of economic growth has a negative the SEA economies and endorsed the findings of Danish et al. [49] and
and statistically significant relationship with carbon emissions. The Hanif [59]. The results further disclose the long-run influence of total
findings evidence and prove the EKC U-shaped hypothesis. The devel­ natural resource rents on carbon dioxide emissions in the developing
oping Southeast Asian countries find it challenging to mitigate carbon Southeast Asian region. The total natural resource rents (TNR) coeffi­
dioxide emissions to maintain environmental cleanliness. However, to cient value is 1.732 and significant at a 1% level of significance. This
achieve a high economic growth rate at the early stage, the excessive indicates that the total natural resource rents have a positive and sig­
intakes of non-renewable energy perhaps increase carbon dioxide nificant impact on CO2 emissions in the long run. The addition in total
emissions. The Southeast Asian countries may perform exceptionally at natural resource rents has boosted carbon dioxide emissions and dete­
the later stage of economic growth and have the potential to control riorated the environmental cleanliness in SEA economies. The reason is
carbon emissions. The results indicate that per capita income when that the overexploitation of natural resources to earn more rent leads to
reached at a certain level (a turning point), further improvement in per environmental degradation and the findings of the present study are also
capita income will help to reduce carbon emissions. This relationship endorsed by the work of Hanif [60]; Ulucak et al. [23]; Shen et al.
between economic growth and carbon emissions approved the EKC (2020). and Adedoyin et al. [19].
inverted U-shaped hypothesis for developing SEA countries and The short-run estimates based on CS-ARDL highlight that economic
endorsed the finding of Al-Mulali et al. [56]; Chen et al., [57]; Cheng growth is a significant source of carbon emissions in the short run while
et al. [38]; and Sinha and Shahbaz [32]. the square of GDP has a negative but insignificant impact on carbon
Renewable energy is the foremost source of environmental cleanli­ emissions. The impact of renewable energy on carbon emissions is also
ness, which is only possible by its sustainable use. The CS-ARDL results negative but statistically insignificant in the short run. The influence of
revealed that the REC coefficient value is − 0.456, significant at a 5% international trade on carbon emissions is also negative but statistically
level of significance, and negative sign shows the increase in renewable significant in the short run. However, the impact of the interaction term
energy consumption reduces the carbon dioxide emissions in SEA is statistically significant and negative impact on carbon emissions. That
countries in the long run. The results suggest that renewable energy is a highlights that renewable energy and international trade jointly have
fortunate energy source to mitigate carbon dioxide emissions in the SEA the potential to mitigate carbon emissions in the SER region. The natural
region. The results show that a one percent increase in reliance on resources rent shows a positive and significant impact of resources uti­
renewable energy sources has the potential to reduce carbon emission by lization on carbon emissions in the short run. The coefficient of error
about 0.456% if all other factors are considered constant. This indicates correction term (ECM) is statistically significant at a 1% level of

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Y. Li et al. Energy Strategy Reviews 41 (2022) 100855

significance and carries the negative sign. The significance of ECM also
reconfirms the cointegration relationship between carbon emissions and
independent variables. The negative sign of the ECM coefficient shows
the convergence of the model from short-run to long-run path to attain
the equilibrium state. In more precise words, the coefficient of ECM
shows the speed of adjustment and our model will converge from short-
run to long-run path with the speed of 19.3% per annum to achieve the
equilibrium state.
5. Conclusion
The study primarily highlights the role of renewable energy, inter­
national trade, and natural resource rents to mitigate carbon dioxide
emissions in developing SEA economies. A second-generation Cross-
section Augmented Im-Pesaran and Shin (CIPS) unit root test is applied
that reveals that all data series are stationary at first difference. West­
erlund [53]; and Banerjee and Carrion-i-Silvestre [54] tests were applied
to test the cointegration and both tests rejected the null hypothesis and
confirmed the presence of cointegration. The CS-ARDL method was
applied to estimate the short-run and long-run results and to tackle the
CD issue and slop heterogeneity. The results revealed that renewable
energy has a significant role to control carbon emissions in the long run
while insignificant impact observed in the short-run period. The findings
also depicted that international trade also played a significant role to
control carbon emissions in the long-run as well as short-run periods.
The most striking results of the study showed that international trade
along with improvement in reliance on renewable energy is a significant
factor to control carbon emissions in the short-run as well as long-run
time frame. Moreover, the high reliance on natural resources rent is
also increasing stress on natural resources utilization and stimulating
carbon emissions in the SER region.
Based on policy insight from this research, the study suggests
improvement in international trade with an intuition of the promotion
of renewable energy in the region may prove an effective strategy for
SER economies to restrict the flare-up of environmental issues in the
region. There is a need to take preventive measures to restrict the
excessive usage of natural resources and maximize the role of renewable
clean energy to mitigate carbon emissions and sustainable growth.
Effective resource utilization and duty-free import and export of
renewable energy production tools and equipment may prove helpful to
expose the role of renewable energy to overcome environmental issues.
Although, the Southeast Asian countries have enhanced the consump­
tion of renewable energy in the last two decades. But these economies
are still lacking in providing renewable energy to households or low-
income families, as they cannot afford the high cost of living. Low
costs renewable energy for households will reduce energy poverty and
demand for low-price non-renewable energy. Therefore, it is essential to
promote renewable energy through cross-border trade and expedite the
role of renewable energy at a regional level to control carbon emissions
and global warming.
Ethical approval
This is an original work that has not been submitted anywhere else
for publication.
Consent to participate
All authors have contributed to the submitted paper. There is no
conflict of interest to disclose.
Consent to publish
The paper submitted with the mutual consent of authors for publi­
cation in Energy Strategy Reviews.
Availability of data and materials
Not applicable.
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.

Appendix 1. Results of Banerjee and Carrion-i-Silvestre cointegration test based on full sample and country-wise are given here

Banerjee and Carrion-i-Silvestre Cointegration Test (Dependent Variable = CO2)

Cross-Sections No Deterministic Specification With Constant With Trend

Cambodia − 4.632*** − 4.732*** − 4.538***

China − 6.121*** − 6.423*** − 6.092***
Fiji − 2.387** − 4.182*** − 3.811**
Indonesia − 2.672** − 1.932 − 2.537**
Lao PDR − 5.327*** − 6.011*** − 5.182***
Malaysia − 3.892** − 4.073*** − 3.769***
Mongolia − 4.874*** − 5.432*** − 4.738***
Myanmar − 2.872 − 3.004** − 3.876**
Papua New Guinea − 2.983 − 3.287** − 4.762***
Philippines − 4.657*** − 5.439*** − 4.561***
Samoa − 2.001 − 2.097 − 2.093
Solomon Islands − 3.822** − 4.173*** − 3.478**
Thailand − 4.891*** − 5.321*** − 5.271***
Vanuatu − 4.277*** − 5.147*** − 4.182***
Vietnam − 3.269** − 3.723** − 3.078**
Full Sample ¡4.089*** ¡4.127*** ¡4.006***
Note: ***, ** represents a 1% and 5% level of significance, respectively.
Note: Ho: No cointegration.
Ha: All panels are cointegrated.

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Y. Li et al. Energy Strategy Reviews 41 (2022) 100855

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