Do export diversification and stock market development drive carbon intensity? The role of renewable energy solutions in top carbon emitter countries

Abstract

While examining the case of top-carbon emitter countries (TCECs), it requires underlining certain common but less explored variables that might have escalated carbon emissions significantly in the preceding years. In this light, we recognized the impact of export diversification, extensive export margin, intensive export margin, stock market development, renewable energy solutions, and income inequality on carbon intensity in the nine top-carbon emitter countries from 1990 to 2016. By using modern econometric procedures such as CIPS and CADF for stationarity, Westerlund test for cointegration, and CS-ARDL test for elasticity coefficients, we computed the temporal results. The long-run elasticity coefficients confirm that horizontal, vertical, and overall improvement in export-basket elevated the level of carbon intensity in the selected countries. Further, the increased size of stock market and income inequality led to an increase in carbon intensity; however, the increased usage of renewable energy contributed to reducing the level of carbon intensity. In terms of policy endorsement, we provided a multipronged framework, which may help these nations to restore air quality in the long run.