Green Energy, Financial Development and Agriculture: Drivers of Environmental Sustainability in ASEAN Economies

Abstract

This study investigates the determinants of CO₂ emissions across ten ASEAN economies from 1990 to 2021, focusing on renewable energy consumption (LNREC), financial development (LNFD), Industry 4.0 (LNIND), agriculture (LNAGRI), global value chains (LNGVA), and digitalization (LNDGT). Employing a rigorous empirical strategy—including Driscoll-Kraay standard errors, Pedroni and Westerlund co-integration tests, quantile regression, and the Method of Moments Quantile Regression (MMQR)—we uncover significant heterogeneous effects across the emission distribution. Renewable energy consumption and agricultural value added consistently reduce CO₂ emissions across all quantiles, while industrial activity and digitalization exacerbate emissions, particularly at higher quantiles. Financial development exerts a moderate yet significant effect on emissions. Participation in the global value chain is associated with increased emissions, suggesting "pollution haven" dynamics within ASEAN manufacturing hubs. Robustness checks using AMG, FMOLS, and DOLS estimators corroborate the main findings. These results carry important implications for policymakers seeking to align ASEAN's post-pandemic recovery with the Paris Agreement targets and the UN Sustainable Development Goals, particularly SDG 7 (Clean Energy) and SDG 13 (Climate Action).