Abstract:
Global warming is the major environmental concern and the main cause of it is the greenhouse
effect caused by greenhouse gases. CO2 is the most potent greenhouse gas. To effectively control
global warming, there is a need to identify potential macroeconomic activities that trigger and
mitigate these emissions. This study measures the effects of foreign direct investment (FDI),
renewable energy consumption (REC), urbanization (UB), trade openness (TRO), and ecological
footprint (EF) on environmental sustainability by taking CO2 emissions as a proxy for it. The
study employs panel data of 143 countries from 2001 to 2020. Data show the presence of cross sectional dependency and slope heterogeneity and suggest the use of second-generation panel
unit root tests, which confirm the presence of unit root at either level or the first difference. The
Westerlund cointegration test confirms the presence of a long-term connection between the
variables. The study uses System GMM to estimate the parameters and finds that REC mitigates
CO2 emissions and restores the environment, while FDI, UP, TRO, and EF trigger these
emissions leading to environmental degradation. The study also prescribes policy
recommendations for improvement in environmental quality
