Environmental sustainability in high‐income countries: Does natural resource protection, financial inclusion, and energy innovation matters?

Abstract

Environmental sustainability (ES) is critical for high‐income countries (HICs) because of their high ecological footprints. They are responsible for global environmental problems as they consume more natural resources, produce more output, and generate more greenhouse gases than other countries, which could have severe consequences for land degradation. In the context of resource conservation and land development policies, this study examined the impact of natural resource protection (i.e., land, water, and biodiversity), financial institution inclusion, financial market inclusion, and energy innovation (EI) on the enhancement of ES in 15 HICs from 1995 to 2020. The study applied Feasible GLS and Prais–Winsten regression to consider cross‐sectional dependence, autocorrelation, heteroscedasticity, and slope heterogeneity problems for unbiased and robust findings along with 2nd generation cointegration tests and the JKS Granger non‐causality test. Natural resource protection, financial institution inclusion, financial market inclusion, and EI have positive effects on ES, along with green energy and environmental regulations. It was also found that an increase in real income negatively impacts ES, as it increases the use of natural resources and energy and generates more waste and pollution which further accelerates land degradation. Cointegration and causality also exist between variables of interest. This shows that protecting natural resources, increasing financial inclusion, and EI can be successful strategies for fostering a green transition, reducing environmental impacts, and embracing more sustainable practices and laws to meet development goals and develop sustainable land use policies. This study suggests that HICs should protect land, water, and biodiversity, promote green financing, digital payments, EI, energy diversification, and environmental protection to achieve ES which is critically important to reduce land degradation.