Impact of Renewable Energy, Business Climate, and Human Capital on CO2 Emissions: Empirical Evidence from BRICS Countries

Abstract

Since the 1950s, the remarkable amount of global environmental degradation has heightened environmental concerns at both national and international levels. This shift has spurred intensive research into the causes of environmental degradation and potential remedies, including environmental taxes, fines, education, and regulations. The drivers of CO2 emissions have been widely explored in the literature, but the nexus between business climate, human capital, and CO2 emissions has not been examined sufficiently. Therefore, the purpose of this study is to delve into the interplay between renewable energy, business climate, human capital, and CO2 emissions in BRICS countries from 2000 to 2020 using panel causality and cointegration tests. Our research hypotheses suggest that there are significant mutual interactions among renewable energy, business climate, human capital, and CO2 emissions based on the associated literature. The results of the causality test verify the research hypotheses by uncovering a bidirectional causality between business climate, renewable energy use, human capital, and CO2 emissions. Furthermore, the cointegration analysis reveals that increases in renewable energy use and human capital decrease CO2 emissions at the panel level, but a positive business climate increases CO2 emissions at the panel level. However, the impact of business climate on CO2 emissions at the country level varies among BRICS economies based on environmental policies. In conclusion, investing in green energy technologies and education is a useful tool to decrease CO2 emissions. In addition to this, the positive effect of business climate on CO2 emissions should be balanced by regulations to increase environmental, social, and governance awareness of firms.