Does Fiscal Decentralization and Green Innovation mitigate the environmental pollution with the help of Institutional governance? Evidence from Asian Countries using novel (MMQR)

Abstract

This research aims to examine the influence of fiscal decentralization and green innovation on CO2 emission with the help of institutional governance. Heterogeneous panel estimations and cross-sectional dependence approaches have been applied to remove the coefficient magnitude differences of 48 countries spanning from the year 1998 to 2018. The results of the novel methodology “Method of Moments Quantile Regression” (MMQR) shows that fiscal decentralization, green innovation, institutional governance, and human capital are major elements to decrease the emissions of carbon whereas GDP and population increase the level of emissions. MMQR confirms that fiscal decentralization has a declining impact from the median to higher quantiles (4–9) on carbon emissions. So central government should empower the local government to control pollution by coordinating environmental regulations and policies. Our institutions should be developed enough to take strict actions against those who re involved in corruption, violation of environmental law that have set for mitigating the CO2 emissions. This study will help the policymakers for taking decision to improve the environmental quality and promote the sustainable development.

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“…Energy-saving and pollution-mitigation programs are used by city authorities in highly decentralized areas to guarantee that their energy-saving and carbon-neutrality objectives are accomplished. This empirical evidence is also consistent with Rani’s ( 2021 ) findings that fiscal decentralization aids Asian countries in reducing pollution. In this light, the authors argued that fiscal decentralization might be increased through human capital and green innovation in order to attain ecological sustainability in Asian block examined.…”

“…However, their empirical findings have produced far more heat than light, resulting in significant discrepancies in the evidence across different methodologies and nations tested. While many studies have found that fiscal decentralization improves environmental quality (Xu 2022 ; Tufail et al 2021 ; Rani 2021 ), others have found that fiscal decentralization worsens it (Yang et al 2021a ; Xiao-Sheng et al 2021 ).…”

“…Tufail et al ( 2021 ) used panel data from seven highly fiscally decentralized OECD countries to investigate the effect of fiscal decentralization on CO 2 emissions and observed that fiscal decentralization improves the environment for OECD group. Likewise, utilizing the novel “Method of Moments Quantile Regression” (MMQR) approach, Rani ( 2021 ) showed that fiscal decentralization helps to minimize environmental pollution in Asian nations from 1998 to 2018. In addition, Jain et al ( 2021 ) investigated the fiscal decentralization–CO 2 emissions nexus for nine Asian nations from 1984 to 2017 and found that fiscal decentralization reduces CO 2 emissions while having an unbalanced influence on environmental quality.…”

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“…Tufail et al (2021) used panel data from seven highly fiscally decentralized OECD countries to investigate the effect of fiscal decentralization on CO 2 emissions and observed that fiscal decentralization improves the environment for the OECD group. Similarly, Rani (2021) utilized the novel Method of Moments Quantile Regression approach and showed that fiscal decentralization helped to minimize environmental pollution in Asian nations from 1998 to 2018. In addition, Jain et al (2021) explored the dynamic influence of fiscal decentralization on environmental quality for nine Asian nations from 1984 to 2017.…”

“…However, limiting CO 2 emissions would result in lower output, which would impede economic growth. The reason is that this case is linked to energy usage, which is crucial for economic development (Jain et al 2021;Li et al 2021a, b, c;Rani 2021). Thus, following or implementing measures that are intended to curb rising temperatures directly is exceedingly difficult for these nations.…”