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The Impact of Socio-economic and Environmental Sustainability on CO2

Emissions: A Novel Framework for Thirty IEA Countries

Article in Social Indicators Research · June 2021

DOI: 10.1007/s11205-021-02629-3

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Social Indicators Research
https://doi.org/10.1007/s11205-021-02629-3

ORIGINAL RESEARCH

The Impact of Socio‑economic and Environmental

Sustainability on ­CO2 Emissions: A Novel Framework
for Thirty IEA Countries

Irfan Khan1 · Fujun Hou1

Accepted: 27 January 2021

© The Author(s), under exclusive licence to Springer Nature B.V. part of Springer Nature 2021

Abstract
The extent to which socio-economic factors other than income and household size are
associated with household C ­ O2 emissions and whether associations vary across emission
domains remains contested in the literature. We explore the impact of socio-economic
and environmental sustainability indicators on C ­ O2 emissions in the presence of combus-
tible renewables, and the economic growth of thirty International Energy Agency (IEA)
member countries. We develop a comprehensive empirical analysis using panel data and
apply advanced econometric techniques for the period from 1995 to 2018. The panel co-
integration analysis indicates long-run relationships among the variables. In addition, aug-
mented mean group analysis and common correlated effects mean group analyses explain
that environmental sustainability reduces ­CO2 emissions in the short run. Findings of fully
modified least square estimates and long-run dynamic least squares estimates confirm that
socio-economic sustainability increases ­CO2 emissions and environmental sustainability
decreases them. The results of Dumitrescu and Hurlin Granger causality analysis reveal
that combustible renewables, environmental sustainability, and economic growth bidirec-
tionally Granger cause ­CO2 emissions, but socio-economic sustainability unidirectional
Granger causes environmental quality. Policymakers in the IEA economies are encouraged
to establish policies that promote a sustained lifestyle, ecological awareness, clean techno-
logical innovations, limit ­CO2 emissions, ecological trade-offs, and ­CO2 emissions ceilings
to avoid rebound effects and limit environmental degradation. The study’s limitations are
discussed, and useful directions for future research in the area are proposed.

Keywords Environmental sustainability · Socio-economic sustainability · CO2 emissions ·

Economic growth · IEA countries

* Fujun Hou
houfj@bit.edu.cn
Irfan Khan
Irfan.Khan@bit.edu.cn; Khan.Irfan4032@yahoo.com
1
School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China

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 I. Khan, F. Hou

1 Introduction

Humanity faces unprecedented environmental and socio-economic sustainability chal-

lenges (Ameyaw and Yao 2018; Aye and Edoja 2017; Bhattacharya 2020). Climate change
is considered the greatest influencing factor on both the social and ecological business set-
tings. Scientists and environmentalists agree to a great extent that the continuous increase
in carbon ­(CO2) emissions is one of the biggest environmental threats, as it is raising the
temperature and increasing weather anomalies and will ultimately influence the world’s
long-term climate fluctuations. C ­ O2 emissions are at the center of concern because of its
grave implications for the health of the environment and all life on earth. Growing ­CO2
emissions is a problem for the entire world, rather than the issue of any individual nation,
since no country can confront such global challenges alone. Therefore, a cumulative effort
at the global level is obligatory in addressing environmental problems (Ikram et al. 2020;
Jebli et al. 2016; Mendonça et al. 2020).
CO2 emissions present a significant threat to a sustainable environment. An increase in
the frequency and intensity of extreme meteorological conditions, rising sea levels, and
biodiversity rearrangements contribute to human-induced climate change that is due to
­CO2 emissions (Bhattacharya 2020). In return, these environmental complications generate
a flood of problems, damage the infrastructure, risk health and well-being, impact liveli-
hoods and nutrition, and increase migration and violent encounters, among other crucial
social issues (Bhattacharya 2020; Pecl et al. 2017; Watts et al. 2018). Countries that have
set on the path of social and economic development have faced the challenge of environ-
mental emissions from increased energy use. To address such socio-economic and environ-
mental threats, the United Nations Sustainable Development Goals (SDGs) deliver a plan
for global collaborations as a blueprint for a sustainable future for all.
Energy sustainability is the dynamic consideration of the SDGs framework, which plays
a significant role in improving socio-economic development. From the background of envi-
ronmental sustainability, The seventh SDG (SDG 7) comprises three goals related to sus-
tainable energy: universal availability of reliable and affordable energy facilities, increased
use of renewable energy, and improvement of energy efficiency (Gielen et al. 2019). Non-
renewable and renewable energies are the primary energy sources. The former includes
crude oil, natural gas, coal, and nuclear power, and the latter geothermal, biomass, wind,
hydroelectric, and wave energy (Zafar et al. 2019). The non-renewable sources can have
negative consequences for the environment because they produce pollution and ­CO2 emis-
sions, thus contributing to global warming. Renewable energy sources, on the other hand,
are environmentally sustainable and a source toward which the modern world should move
in pursuit of efficient energy production (Adams et al. 2018; Akif and Sinha 2020; Aydin
2019; Belaïd and Zrelli 2019; Luqman et al. 2019; Mohamed et al. 2019; Tugcu and Topcu
2018; Yao et al. 2019).
Technological transformations and the efficient energy policies that support them can
help to reduce ­CO2 emissions and energy consumption, and gains from increased effi-
ciency of energy consumption may considerably reduce the per-unit price of energy, caus-
ing energy consumption to increase again. The literature names this effect the “rebound”
or “take-back” effect (Gottron 2001; Greening et al. 2000; Herring and Roy 2007; Small
and Dender 2005; Sorrell 2007). The rebound (or “take-back”) effect refers to an increase
in energy consumption that is due to a decrease in energy prices after the implementa-
tion of technological transformations and energy efficiency (Greening et al. 2000; Wilby

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The Impact of Socio-economic and Environmental Sustainability…

andWigley 1997). As Gottron (2001) explains, the rebound consists of three kinds of
effects: direct effects, indirect effects, and market or dynamic effects.
The primary purpose of this study is to determine the impact of crucial socio-economic
and environmental sustainability indicators on ­CO2 emissions in the presence of economic
growth in thirty International Energy Agency (IEA) member countries. IEA countries were
selected because of their high rate of economic growth, resulting in high energy consump-
tion. The IEA countries, which are at the heart of worldwide engagement in environmental
sustainability, provide authoritative analysis, data, policy recommendations, and real-world
solutions to help countries provide secure and sustainable energy for all. Empirical inves-
tigation of IEA countries is appropriate because they work with other countries to shape
energy and environmental policies in pursuit of a secure and sustainable global future. IEA
countries’ research and development in oil and gas extraction, innovations in hydraulic
fracturing, policies, and enhancement of the reliability, affordability, and sustainability of
energy efficiency vastly increased these countries’ importance in terms of energy research
(IEA 2019).
This study addresses the SDG agenda of 2030 by considering the social, economic,
and ecological dimensions of sustainable development. The dynamic links between C ­ O2
emissions and socio-economic and environmental sustainability are only marginally dis-
cussed in the literature. As far as we know, this study is the first to link socio-economic
and environmental sustainability with the sustainability concepts of the rebound effect
and the cap-and-trade system. The literature is deficient in clustering the crucial aspects
of socio-economic and environmental sustainability to determine the aggregated anteced-
ents of environmental quality. Therefore, this study constructs two indices using principal
component analysis (PCA), one for socio-economic sustainability, which undertakes seven
critical indicators of socio-economic sustainability (Table 1), and one for environmental
sustainability, which incorporates significant indicators of environmental sustainability.
Using these indices as independent variables, this study draws the dynamics between ­CO2
emissions and socio-economic and environmental sustainability in a multivariate produc-
tion function.
The remainder of this paper is structured as follows. Section 2 briefly discusses the
related literature and theoretical context. Section 3 reports on the study’s modeling and
data. Section 4 contains the methodological framework, and Sect. 5 provides results and a
discussion. Section 6 contains the concluding remarks and limitations, while Sect. 7 pro-
vides policy implications.

2 The Literature and Theoretic Contextual

The theoretical idea of environmental quality in academics originates with the semi-
nal paper of Grossman and Krueger (1991), who discuss the environmental dynamics of
greenhouse gas emissions (GHGE) and economic growth. Since then, remarkable aca-
demic progress and work have been conducted that uses various socio-economic and envi-
ronmental sustainability indicators of the aspects of environmental quality and distress.
Appropriate assessment and follow-up for sustainability measurements are necessary but
may be difficult because of the large number of indicators in the sustainability framework.
Various organizations group the sustainability matrices by categorizing indicators (Goals
n.d.; Labuschagne et al. 2005). The source of the indicators of both socio-economic and

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 Table 1  Detail of variables
Variables Symbols Unit Definition Source

13
Carbon emissions CO2 Total ­CO2 emissions KTOE Total ­CO2 emissions fuel combustion IEA
Mt-CO2 represents total ­CO2 emissions
from fuel combustion
Renewables and waste (total primary energy REW (Total primary energy supply) KTOE Renewables and waste contain hydro, geo- IEA
supply) thermal, solar, wind, and tide/wave/ocean
energy and usage of these energy proce-
dures for energy and heat generation
Gross domestic product GDP Current US$ GDP is the summation of the gross value WDI
added by all domestic producers within the
economy, including the product taxes and
minus subsidies not included in the cost of
the production process
Renewable energy consumption Environmental sustainability Electricity output (GWh) Renewable energy is energy production from IEA
hydro, geothermal, solar, wind, tide/wave/
ocean energy, biofuels, and renewable
waste sources
Non-renewable energy consumption Electricity output (GWh) Non-renewable energy is energy production IEA
from coal, peat, oil shale, oil, and natural
gas sources
Natural resource depletion % of GNI Natural resource-depletion measures the HDI
resource consumptions quicker than it can
be regeneration
Mortality rate Per 1000 live births Less than five mortality-rate is the possibil- WDI
ity per 1000 that a newborn infant will die
before the age of 5 years
Adolescent-fertility rate Births per 1000 Women ages 15–19 The adolescent-fertility rate is the sum of WDI
births per 1000 women ages 15–19
Forest area Sq. km Forest-area reflects the standing trees WDI
irrespective of the condition of productive
or not
I. Khan, F. Hou

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 Table 1  (continued)
Variables Symbols Unit Definition Source

Surface area Sq. km The surface area is the total area of the coun- WDI
try, comprising areas under inland bodies of
water and coastal waterways
Research and development expenditures Socio-economic sustainability % of GDP Expenditure towards research and develop- WDI
ment activities for the provision of goods
and services to society
Gross fixed capital formation Constant 2010 US$) Gross fixed capital formation comprises land WDI
improvements, machinery, plant, purchase
of equipment, road construction, institu-
tions, industrial and commercial buildings,
etc.
Labor force Total labor force The labor force includes the worker pres- WDI
ently employed and the workers who are
currently unemployed, but they are seeking
employment opportunities having the age of
15 years and above
Final consumption-expenditure % of GDP Final consumption-expenditure is the total of WDI
The Impact of Socio-economic and Environmental Sustainability…

private, governmental, and household final

consumption
Inflation, consumer prices Annual % Inflation measured from the consumer price WDI
index imitates the annual percentage change
in the cost to the average purchaser of buy-
ing a basket of goods and services
Population growth Annual % The population is de-facto based, derived WDI
from the total population
Imports of goods and services % of GDP Imports of goods and services are the market WDI
value of all products and services

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 I. Khan, F. Hou

environmental sustainability selected for this study’s indices is the list provided by the
human development reports (HDR) (Kapur and Kazi 2015; Martin and Martin 2019).
The seven indicators of environmental sustainability are renewable energy consumption,
non-renewable energy consumption, natural resources, mortality rate, adolescent fertility,
forest area, and surface area. The socio-economic index’s seven indicators are labor force,
population growth, research and development expenditure, gross fixed capital formation,
consumer prices, and consumption expenditure. The HDR also lists C ­ O2 emissions among
the environmental sustainability indicators, but we did not include it in the index; instead,
we included C ­ O2 emissions as a dependent variable for environmental quality, as in Aye
and Edoja (2017), Khan et al. (2020a), and Shafik (1994). The current literature reflects a
little picture of two research aspects of the associations between ­CO2 emissions and envi-
ronmental and socio-economic sustainability factors.

2.1 Environmental Sustainability Factors and ­CO2 Emissions

The effect of energy consumption on the environmental quality is widely discussed in sev-
eral seminal works (Nasreen et al. 2017, 2020; Zafar et al. 2020), and authors find that
energy consumption stimulates ­CO2 emissions (Khan et al. 2019; Naseem et al. 2020). Cai
et al. (2018) study the relationship between energy consumption and C ­ O2 emissions for G-7
countries and explain that ­CO2 emissions lead to clean energy consumption. Adedoyin and
Zakari (2020) examine the impact of energy consumption and economic expansion on ­CO2
emissions for the United Kingdom (UK) using the autoregressive distributed lag (ARDL)
model and find that energy policy certainty reduced ­CO2 emissions in the UK from 1985 to
2017. Using the long-run estimates of the fully modified least squares (FMOLS) approach,
Badeeb et al. (2020) assess the natural resource dependence in the orthodox Environmen-
tal Kuznets Curve (EKC) hypothesis and conclude that resource dependent economies do
not follow the pattern of the EKC hypothesis. Danish et al. (2019) conclude that abundant
natural resources contribute to pollution in South Africa, although studies like Balsalobre
et al. (2018) and Hussain et al. (2020) confirm that abundant natural resources reduce ­CO2
emissions.
Morton et al. (2009) elucidate that deforestation is the second-largest anthropogenic
source of C ­ O2 emissions to the atmosphere, after fossil fuel combustion. Brack (2019)
confirms that forests are highly desirable for achieving objectives related to climate miti-
gation and adaptation. According to the World Health Organization (2012), 12.6 million
people—23% of all deaths in that year—died because of poor living situations and working
in unhealthful environments. Rasoulinezhad and Taghizadeh-hesary (2020) explain that
mortality is profoundly affected by fossil fuels and ­CO2 emissions in the Commonwealth of
Independent States (CIS) region. Overall, growing ­CO2 emissions reduces life expectancy
at birth and increases infant mortality (Erdoğan et al. 2019).

2.2 Socio‑economic Sustainability Factors and ­CO2 Emissions

Abdouli and Hammami (2017), Le and Sarkodie (2020), and Nasreen et al. (2020) find
a bidirectional causality relationship and trade-off effects between economic growth
and ­CO2 emissions. The environmental influences of population growth are high-
lighted in O’Sullivan (2020) and Rahman (2017). Employing FMOLS and dynamic
least squares (DOLS), Rahman (2017) states that population density adversely affects
environmental quality. However, O’Sullivan (2020) argues that increasing population

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The Impact of Socio-economic and Environmental Sustainability…

stabilizes the steady-state economy and predicts that population dynamics may con-
tribute significantly to the ecological research agenda in the future. Ike et al. (2020)
assess the role of imports and exports (trade) influences on environmental quality
using a vector error correction model (VECM) and Granger causality analysis, and
confirm that trade volume is positively associated with ­CO2 emissions (Tawiah et al.
2021).
Ma et al. (2020) and Zhang et al. (2018) discussed the important role of labor sup-
ply and labor productivity in managing environmental pollution. Further, Ma et al.
(2020) report that labor productivity is negatively associated with environmental man-
agement, while quality management moderates this relationship. However, using spa-
tial correlations, Zhang et al. (2018) confirm the significant negative impact of labor
supply on air pollution in China’s 112 cities, while Ahmad et al. (2019b) and Khan
et al. (2020b) show that remittance inflows help combat C ­ O2 emissions. The role of
capital accumulation on environmental uncertainty is incorporated in work conducted
by Kwok et al. (2018) and Zhang et al. (2020). Zhang et al.’s (2020) empirical find-
ings show that rational and cognitive capital accumulation is positively associated
with environmental performance, while Ahmad et al. (2019a) and Ahmad and Khattak
(2020) show that an increase in domestic spending and innovation degrades environ-
mental quality in the long run.
All these studies are conducted by employing several socio-economic and environ-
mental factors with different variables. However, none of the literature labels and clus-
ters these factors to identify the aggregated antecedents of environmental quality. The
dynamic links between ­CO2 emissions and such clustered indices of socio-economic
and environmental sustainability indicators are only marginally discussed in the litera-
ture. This study fills the gap by clustering the crucial socio-economic and environmen-
tal sustainability indicators using PCA.
The control of the ­CO2 emissions that come with economic growth is vital for sus-
tainable economic growth (Ameyaw and Yao 2018). Environmental degradation is the
trademark of industrial development and is a significant driver of growth and develop-
ment. However, economic growth may feed adverse ecological and sustainability out-
comes (Lu 2017). Socio-economic sustainability is a prerequisite to improved living
standards, social welfare, and a flourishing natural environment. However, socio-eco-
nomic sustainability has a significant influence on ­CO2 emissions (Zhou et al. 2018).
Environmental sustainability reduces C ­ O2 emissions in the long run (Medina et al.
2016). Analogously, anthropogenic ­CO2 emissions are a severe challenge to a sustain-
able environment (Bhattacharya 2020). The link between energy consumption, C ­ O2
emissions, and sustainable economic growth is of grave concern, as higher energy
consumption is associated with higher economic growth and higher carbon emis-
sions (Waheed et al. 2019). Non-renewable energy relies mostly on fossil fuels, which
involves the hydrocarbon construction process that creates air pollution. Combustible
renewable energy institutes a substantial energy supply component, which carries the
possibility of improving the prevailing energy mix, balancing market inconsistency,
and protecting the ecological environment by lowering C ­ O2 emissions (Zafar et al.
2019).
Hence, given this literature and this theoretical backdrop, economic growth and
socio-economic sustainability are significantly positively associated with ­CO2 emis-
sions, while environmental sustainability and combustible renewables and waste (as a
primary energy supply) are negatively related to C ­ O2 emissions. Figure 1 explains the
underlying theoretical framework of this study.

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 I. Khan, F. Hou

Fig. 1  Theoretical framework

3 Modeling and Data

3.1 Economic Modeling

Instead of individually estimating the parameters presented in Table 1 under the brackets of
socio-economic and environmental sustainability, we form indices to determine the aggre-
gated antecedent to environmental quality. We construct two indices using PCA, one for
environmental sustainability and one for socio-economic sustainability. (Empirical details
of the principal components are presented in “Appendix 2”). Using these indices as inde-
pendent variables, we investigate the impact of socio-economic and environmental sustain-
­ O2 emissions, taking economic growth and combustible renewables and waste
ability on C
as additional determinants of ­CO2 emissions in a multivariate production function, such
that:
( )
CO2it = f ENSit , SESit , GDPit , REWit . (1)

We transform the study variables into their log forms to safeguard the elastic interpreta-
tions of research coefficients. The log-linear form of Eq. (2) is as below:
lnCO2it = 𝛽0 + 𝛽1 ln ENSit + 𝛽2 ln SESit + 𝛽3 ln GDPit + 𝛽4 ln REWit + 𝜇it , (2)
where 𝛽0 is the slope for the coefficient, t is the time (1995–2018), i is the cross-sections
(1–30), 𝜇 is an error, and 𝛽1 , 𝛽2 , 𝛽3 , and 𝛽4 are coefficients of an index for environmental
sustainability (ENS), an index for socio-economic sustainability (SES), economic growth
(GDP), and combustible renewable and waste (primary energy supply), respectively.

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The Impact of Socio-economic and Environmental Sustainability…

3.2 Data

We seek to determine the links between the ­CO2 emissions of thirty IEA member coun-
tries with environmental and socio-economic sustainability, and explore the moderating
effects of economic growth and renewables and waste on these relationships. We collect
panel data on the thirty IEA member countries (details in “Appendix 1”) from the IEA,
the Human Development Index (HDI), and World Development Indicators (WDI) from
1995 to 2018. Table 1 presents details about the variables we use in this research.

4 Methodological Framework

4.1 Cross‑Section Dependence Test

Economic cooperation and the global village have allowed countries worldwide to share
several economic, social, and business interests. As a result of such cross-section col-
laborations, cross-border associations prevail (Aydin 2019). This research uses Pesa-
ran’s (2004) cross-section dependence (CD) test to examine the cross-sectional depend-
ence Eq. (3):
√ (N−1 N )
2T ∑∑√
CD = Tij 𝜌̂ij CD ∼ N(0, 1), (3)
N(N − 1) i=1 j=i+1

where N is the sample, T is time, and 𝜌ij is the correlation error for individual cross-sec-
tions i and j.

4.2 Second‑Generation Panel Unit Root Test

We incorporate the second-generation panel unit root test developed by Pesaran (2007)
using the augmented cross-section ISP (CIPS), and the cross-section augmented
Dickey–Fuller (CADF) approaches:

ΔYi,t = 𝛼i + bi Yi,t−1 + ci Y t−1 + di ΔY t + 𝜀i,t , (4)

where Y t = N1 i=1 Yi,t , ΔY t = N1 i=1 ΔYi,t ,, and 𝜀i,t is the error. Equation (5) presents the
∑N ∑N
equation for CIPS:
N
1 ∑
CIPS = CADFi . (5)
N i=1

Both the CIPS and the CADF methodologies argue that each cross-section is non-sta-
tionary and a minimum of one cross-section is stationary that at least one cross-section
is non-stationary and at least one is stationary.

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 I. Khan, F. Hou

4.3 Panel Co‑integration Test

We use the Pedroni panel co-integration test from Pedroni (1999) and Kao (1999) to
access the long-run relationship of the variables. We consider the basic framework to be:
yi,t = ai + bi t + 𝛽1i x1i,t + 𝛽2i x2i,t + ⋯ + 𝛽Mi xMi,t + ei,t , (6)
for t = 1, … , T; i = 1, … , N; m = 1, … , M , while y and x consider the co-integrated of
order one, which is I(1). T denotes time, N is each member’s numeral in the panel data set,
M is the size of the variables, and ai and bi are the individual parameters.

4.4 Short‑Run Estimations

Given the evidence of panel unit-root and co-integration for the entire panel of variables,
we highlight how environmental sustainability and socio-economic sustainability influence
­CO2 emissions in the short run, as employed by Li et al. (2020). We use two stages for this
purpose: Eberhardt and Teal’s (2010) Augmented Mean Group (AMG) approach and Pesa-
ran’s (2006) Common Correlated Effects Mean Group (CCE-MG) approach:
T
∑
Stage (i) Δyit = b� Δxit + ct ΔDt + eit ⇒ ĉ t ≡ 𝜇̂ t. (7)
t=2

�
∑
Stage (ii) yit = ai + bi xit + ci t + di 𝜇̂ t. + eit ⇒ b̂ AMG = N −1 b̂ i , (8)
i

where stage (i) is the first difference least squares and stage (ii) includes cross-sections 𝜇̂ t. .
These regressions use a linear trend term to capture the omitted idiosyncratic process that
evolves in a linear approach over time.

4.5 Long‑Run Estimations

Countries require time to establish and implement policies that support their economies
and environmental treaties. To handle the issues of heterogeneity among the cross-sections
and the long-run covariance estimates, we use FMOLS, a robust panel econometric method
(Chiang 2000; Pedroni 2001), for long-run coefficient estimates. The regression model pro-
posed by Pedroni (2000) is shown in Eq. (9):
yit = 𝛼i + 𝛽xit + 𝜇it , (9)

Cross-secon Panel co- Conclusion and

dependence integraon Policy
• Steps in • CIPS • AMG, CCEMG
analysis • FMOLS, DOLS
• CD Test • CADF • Pedroni • Dumitrescu
• LM Test cointegration Hurlin
Panel Data Panel unit-roots
Long and short Causality
run esmates

Fig. 2  Estimation steps

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The Impact of Socio-economic and Environmental Sustainability…

where xit = xit−1 + 𝜀it , i = 1, 2 … , N , t = 1, 2 … , T , for which we model the vector error
process. Figure 2 explains the steps in modeling estimates.

5 Results and Discussion

Table 2 explains the effect of empirical distribution tests for the C­ O2 emissions, renewa-
bles and waste, environmental sustainability, socio-economic sustainability, and economic
growth of IEA member countries. The results show that all the variables have statistically
normal distribution. The cross-sectional dependence using the CD and langrage multiplier
(LM) methods are presented in Table 3. Both methods support the rejection of the null
hypothesis of no significance, as the corresponding probability values of both the CD and
LM approaches are significant at 1%. Therefore, the variables C ­ O2 emissions, renewables,
and waste (primary energy supply), environmental sustainability, socio-economic sustain-
ability, and economic growth have cross-sectional dependence.
Table 4 presents the second-generation unit-root tests of CIPS and CADF, which con-
firm that the variables ­CO2 emissions, renewables and waste, environmental sustainability,
socio-economic sustainability, and economic growth have unit-root at the level. All these
variables become stationary when transformed into the first difference, so all variables are
non-stationary, although they are stationary at the first-difference, which is of degree one
I(1). We use the Pedroni co-integration test to examine the long-run associations of the
variables, as shown in Table 5. The Pedroni co-integration test involves three sections—
the individual intercept, the individual intercept and trend, and no intercept or trend—and
each section divides into two sub-sections, within dimensions and between dimensions.

Table 2  Empirical distribution analysis

Methods ln ­CO2 ln REW ln ENS ln SES Ln GDP

Lilliefors (D) 0.077950a 0.070619a 0.070500a 0.075408a 0.038667b

a a a a
Cramer-von mises (W2) 0.896188 0.708662 0.694936 0.857145 0.208076a
Watson (U2) 0.867515a 0.625056a 0.688651a 0.756127a 0.208018a
Anderson–Darling (A2) 7.185936a 4.471175a 5.208068a 6.629906a 1.257980a
MU 10.33060a 8.669639a − 0.007888a − 0.066035a 26.78335a
SIGMA 1.835677a 1.372632a 1.662631a 1.938841a 1.496434a
a
Significant at 1%
b
Significant at 5%

Table 3  Cross-section dependence test

Variables ln ­CO2 ln REW ln ENS ln SES Ln GDP

CD-test 5.730729a 81.61358a 9.555505a 43.98067a 92.99823a

p value 0.000 0.000 0.000 0.000 0.000
LM-test 111.1256a 245.7341a 115.3202a 114.2330a 283.6840a
p value 0.000 0.000 0.000 0.000 0.000

Under the null hypothesis of cross-section independence CD ⁓ N (0, 1)

a
Rejected at 1%

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 I. Khan, F. Hou

Table 4  Second-generation unit Variables CIPS CADF

root test
Level First difference Level First difference

ln ­CO2 1.63662 − 15.4594a 1.71528 − 13.3719a

a
ln REW 5.84382 − 23.2831 5.74007 − 18.1136a
ln ENS 1.80250 − 17.1704a 1.73074 − 14.5597a
ln SES − 0.59761 − 19.5922a − 0.54816 − 16.8210a
ln GDP 3.08569 − 11.5180a 3.30503 − 11.1270a
a
Significant at 1%
b
Significant at 5%
c
Significant at 10%

Table 5  Co-integration analysis

Methods Within dimension Between dimension

Individual intercept
Panel v statistic 2.01966b 0.52785 2.863660
Panel rho statistic 0.37498 0.40642 − 4.630961a
Panel PP statistic − 3.58067a − 4.41763a − 6.215712a
Panel ADF statistic − 4.87918a − 5.89012a
Individual intercept and trend
Panel v statistic 0.58536 − 1.33239 4.780787
Panel rho statistic 2.42061 2.37943 − 6.246620a
Panel PP statistic − 3.34851a − 4.57770a − 5.179844a
Panel ADF statistic − 4.47404a − 6.19454a
No intercept or trend
Panel v statistic − 1.26422 − 3.31467 2.737909
Panel rho statistic 1.01884 1.49131 − 3.119920a
Panel PP statistic − 1.92666b − 1.31811b − 4.650587a
Panel ADF statistic − 3.05288 a − 2.07679b
a
Significant at 1%
b
Significant at 5%

The results of the three methodologies show the co-integration among the variables, as
the ­CO2 emissions, renewables and waste, environmental sustainability, socio-economic
sustainability, and economic growth of the thirty IEA member countries have a long-run
relationship and move together in the long run.
Table 6 reports the outcome of the short-run AMG and CCE-MG. The result shows
­ O2 emissions even in the short run, while
that environmental sustainability influences C
socio-economic sustainability has no short-run influence on ­CO2 emissions in the thirty
IEA member states. The negative coefficient of environmental sustainability reveals that
a 1% acceleration in environmental sustainability decreases C­ O2 emissions by 58% in the
short run, suggesting that, in the short run, environmental sustainability is more sensi-
­ O2 emissions than socio-economic sustainability is in the IEA economies. It also
tive to C
means that countries should see environmental degradation as a short-run consequence

13
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The Impact of Socio-economic and Environmental Sustainability…

Table 6  Short-run elasticity

Panel AMG Panel CCE-MG
Variables Coefficients z p >|z| Variables Coefficients z p >|z|

ln REW 0.4495699a 6.00 0.000 ln REW 0.4870228a 5.99 0.000

b
ln ENS − 0.5826044 − 2.70 0.007 ln ENS − 0.613825b − 2.96 0.003
ln SES 0.0530536 0.99 0.324 ln SES 0.0198436 0.68 0.499
Ln GDP − 0.1983345c − 1.86 0.063 ln GDP 0.0521868 1.40 0.162
Trend − 0.0040862 − 0.35 0.724 c_d_p 0.7680766b 2.60 0.009
ln ­CO2_avg 0.6817058b 2.36 0.018 Trend − 0.0122161b − 2.69 0.007
ln REW_avg − 0.4302085 − 1.49 0.135 _Cons 5.629914a 4.51 0.000
ln ENS_avg 0.129767 0.92 0.358
ln SES_avg − 0.0572789 − 1.37 0.172
ln GDP_avg 0.2477091b 2.10 0.036

Root mean squared error (sigma): 0.0460 and 0.0360 respectively, c_d_p refers to the standard dynamic
process, and the variable trend refers to the group-specific linear trend terms
a
Significant at 1%
b
Significant at 5%
c
Significant at 10%

Table 7  Long-run estimations Variable Panel-FMOLS Panel-DOLS

Coefficient t-Statistic Coefficient t-Statistic

ln ENS − 0.264966a − 18.31112 − 0.347356a − 7.161616

a
ln SES 0.135486 5.698528 0.112227a 3.833679
ln GDP 0.216913a 20.11569 0.257881a 5.383558
ln REW − 0.035069b − 4.937745 − 0.127115a − 2.373084
a
Significant at 1%
b
Significant at 5%

of environmental sustainability and economic growth (Basiago 1998; Khan 1995). For
the long-run coefficient estimates, we use Panel-FMOLS, and Panel-DOLS approaches
(Table 7) for environmental sustainability, socio-economic sustainability, economic
growth, and renewables and waste. The link between environmental sustainability and C ­ O2
emissions is significantly negative at the 1% level of significance, which confirms both
the panel-FMOLS and panel-DOLS methodologies. The panel-FMOLS and panel-DOLS
show that a 1% acceleration in environmental sustainability results in decreasing the C ­ O2
emissions of IEA member countries by 26% and 34%, respectively. This result suggests
that any measures taken by the IEA economies to address environmental sustainability will
contribute significantly to reducing ­CO2 emissions. These findings are in line with the find-
ings of Lin and Xu (2020), Mikayilov et al. (2018), and Xie and Liu (2019).
The link between socio-economic sustainability and ­CO2 emissions is positive and
highly significant, as a 1% increase in socio-economic sustainability increases the ­CO2
emissions by 13% (panel-FMOLS) and 11% (panel-DOLS). This result suggests that
higher socio-economic sustainability increases C ­ O2 emissions in the economies of IEA

13
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 I. Khan, F. Hou

member countries and that, as the center of socio-economic activity develops, urbaniza-
tion, population aggregation, and cities are more likely to be the primary sources of grow-
ing ­CO2 emissions. These results are consistent with the findings of Liu et al. (2019), Mi
et al. (2017) and Ou et al. (2019).
The link between renewables and waste (primary energy supply) is significant at the 5%
level and is adversely associated with C ­ O2 emissions. A 1% acceleration in the primary
energy supply from renewables and wastes reduces C ­ O2 emissions in IEA economies by
3% (panel-FMOLS) and 12% (panel-DOLS), suggesting that renewable sources are envi-
ronmentally friendly in reducing C ­ O2 emissions (Zaidi et al. 2019). Similarly, economic
growth and ­CO2 emissions are positively linked at a 1% level of significance. Thus, when
the economic growth of the thirty IEA member countries accelerates by 1%, it increases
­CO2 emissions by 21% (panel-FMOLS) and 25% (panel-DOLS) in the long run.
Further, the positive relationship between economic growth and ­ CO2 emissions in
the IEA economies suggests that, at the initial stage of growth, emerging economies are
primarily concerned with economic expansion, infrastructure, and increased consump-
tion, and they overlook the environmental aspects of increased C ­ O2 emissions. However,
with further economic growth, the increasing ­CO2 emissions start to decline, which is the
EKC framework’s situation. This finding demonstrates the sharp distinction of the EKC
hypothesis for C ­ O2 emissions, which reflects the inverse U-shaped relationship between
­CO2 emissions and economic growth. These results are consistent with previous studies
(Muhammad and Khan 2019; Wasti and Zaidi 2020; Zaidi et al. 2019; Zhou et al. 2018)
that show that economic growth is positively associated with ­CO2 emissions (Khan and
Hou 2020; Khan et al. 2021), but our results are contrary to the findings of Ben Jebli and
Belloumi (2017) and Muhammad (2019), which suggest that economic growth is adversely
associated with ­CO2 emissions. The interaction of all these long-run estimates is summa-
rized in Figs. 3 and 4. The scatter confidence ellipse boxplot matrix in Fig. 3 shows the
multiple interactions among the variables in a single graph of the long-run FMOLS and
DOLS estimates, while the rotated boxplot multiple plots in Fig. 4 show the shape of the
normal distribution, its central value, and its variability.
Supporting the result of long-run elasticity, the results of a pairwise Dumitrescu and
Hurlin panel causality analysis shown in Table 8 reveal that renewables and waste, envi-
ronmental sustainability, and economic growth bidirectional Granger caused C ­ O2 emis-
sions in IEA countries during the research period. However, socio-economic sustainability
unidirectional Granger caused C ­ O2 emissions in these countries. A bidirectional causality
relationship also ran from renewables and waste and GDP to the ­CO2 emissions of IEA
member countries from 1995 to 2018.

6 Conclusion and Limitations

CO2 emissions have steadily risen worldwide since the beginning of the 2010s (Dong et al.
2020). This study addresses the 2030 SDG agenda by considering the social, economic,
and environmental dimensions of sustainable development. We construct two indices using
PCA—one for environmental sustainability and one for socio-economic sustainability—to
­ O2 emissions of thirty IEA member countries and explore the
identify their impact on the C
moderating effects of economic growth and renewables and waste. We use panel data from
IEA, HDI, and WDI for the period from 1995 to 2018. We apply advanced econometric
approaches for empirical analysis, including cross-section dependency, a second-generation

13
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The Impact of Socio-economic and Environmental Sustainability…

16

12
ln CO2

5.0

2.5
ln ENS

0.0

-2.5

-5.0

4
ln SES

-4

-8

32

30
ln GDP

28

26

24

22

16

12
ln REW

0 4 8 12 16 -5.0 -2.5 0.0 2.5 5.0 -8 -4 0 4 8 20 24 28 32 0 4 8 12 16

ln CO2 ln ENS ln SES ln GDP ln REW

Fig. 3  Scatter confidence ellipse boxplot matrix

ln CO2 ln ENS

3 4 5 6 7 8 9 10 11 12 13 14 15 -5 -4 -3 -2 -1 0 1 2 3 4

ln SES ln GDP

-7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 22 23 24 25 26 27 28 29 30 31

ln REW

3 4 5 6 7 8 9 10 11 12 13

Fig. 4  Rotated boxplot multiple plots

13
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 I. Khan, F. Hou

Table 8  Pairwise dumitrescu Dependent Independent

hurlin panel causality tests
ln ­CO2 ln REW ln ENS ln SES ln GDP

ln ­CO2 – 3.81644a 6.14198a 1.35159 2.46434b

(0.0001) (0.0000) (0.1765) (0.0137)
ln REW 3.89875a – 8.69177a 3.76764a 1.68064c
(0.0001) (0.0000) (0.0002) (0.0928)
ln ENS 3.62208a 7.24148a – 2.54863b 4.14427a
(0.0003) (0.0000) (0.0108) (0.0000)
ln SES 2.02925b 3.53867a 3.13700a – 3.97951a
(0.0424) (0.0004) (0.0017) (0.0000)
ln GDP 5.34291a 11.9964a 8.92993a 3.68205a –
(0.0000) (0.0000) (0.0000) (0.0002)
a
Significant at 1%
b
Significant at 5%
c
Significant at 10%

unit root test, and empirical distribution analyses. Short and long-run dynamics are evaluated
using AMG and CCE-MG, the Pedroni residual test of co-integration, panel FMOLS, panel
DOLS and pairwise Dumitrescu Hurlin Panel causality analysis.
Our findings suggest that environmental sustainability reduces ­CO2 emissions in the short
and long runs, while socio-economic sustainability raises ­CO2 emissions in the long run.
Further, renewables and waste are negatively associated with ­CO2 emissions, suggesting that
renewable sources of energy are environmentally friendly and improve environmental quality.
Similarly, economic growth and C ­ O2 emissions are positively linked with each other, demon-
strating the sharp distinction of the EKC framework. Our findings suggest that renewables and
waste, environmental sustainability, and economic growth bidirectionally Granger causes ­CO2
emissions, while socio-economic sustainability unidirectionally Granger causes C ­ O2 emis-
sions in IEA member countries.
One of this study’s limitations is that it does not divide by their level of income. Future
research could incorporate the countries’ income levels and technology imports to investigate this
crucial relationship in IEA countries. The study also includes only socio-economic and environ-
mental sustainability indicators and incorporates limited factors in the PCA matrices. Future stud-
ies could also bring into play the economic and political sustainability indicators and include other
factors, such as urbanization, the ecological footprint, the role of education, per capita income, and
debt servicing for added value. Moreover, including the quality of life index could make the study
exciting by examining its relationship with C­ O2 emissions in the IEA member countries.

7 Implications for Theory and Practice

The growth and development in the thirty IEA member countries have resulted in a
dilemma related to environmental sustainability, socio-economic sustainability, and C ­ O2
emissions. Efficient legislation and policy should be implemented to resolve this dilemma.
Examining the links among socio-economic sustainability, environmental sustainability,
economic growth, and C ­ O2 emissions provides a strong theoretical background. The long-
run estimates of environmental sustainability in Table 7 suggest that existing resources and
cost-effective measures can reduce C ­ O2 emissions, improving environmental quality by

13
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The Impact of Socio-economic and Environmental Sustainability…

26–38% in the IEA countries. However, a number of barriers affect the optimal exploita-
tion of this environmentally sustainable potential.
The results of long-run estimates show that environmental sustainability and renewables
and waste (primary energy supply from renewables and waste) are negatively associated
with ­CO2 emissions in the thirty IEA member countries. It is realistic for these countries’
governments to improve environmental quality and promote renewable energy consumption
to decrease ­CO2 emissions. Policy analysts and economists emphasize the use of renewable
energy to improve the quality of the environment (Schober et al. 2018; Zafar et al. 2019),
and these countries should prioritize lowering ­CO2 emissions by increasing the efficiency
of energy use and optimizing the use of renewable resources. However, the expected gains
from such technological transformations may lead to a rebound or take-back effect. To avoid
such an undesirable situation, policymakers in the IEA economies are encouraged to limit
­CO2 emissions and environmental trade-offs. Imposing energy and C ­ O2 emission taxes,
along with setting a ceiling and floor for ­CO2 emissions, may also prove helpful.
The long-run estimates shown in Table 7 reveal that socio-economic sustainability and
economic growth are positively associated with C ­ O2 emissions in the thirty IEA member
countries. It is not practical for any government to reduce ­CO2 emissions at the expense of
socio-economic sustainability and economic growth or to make changes to the entire socio-
economic structure to attain ­CO2 emission reduction targets. Further, the transfer of labor
force from rural to urban areas also increases the demand for energy consumption, produc-
ing more C ­ O2 emissions. Thus, strategic socio-economic sustainability planning to control
land development, expand the efficiency of land use, and curtail damage to the environ-
ment is necessary for IEA economies. Asymmetric land development may lead to higher
energy consumption to maintain transport and related infrastructure.
Since a well-planned socio-economic structure is necessary for conservation and controlling
emissions, the governments of IEA countries should reassert the tertiary due diligence of the envi-
ronmental management system to encourage high technology manufacturing, financial develop-
ment, services, and internet businesses, which have low energy demands and low C ­ O2 emissions.
The transformation from high energy consumption and high ­CO2 emissions to low energy con-
sumption and low C ­ O2 emissions can decrease C
­ O2 emissions while maintaining rapid economic
growth in these countries. Considering the possible socio-economic and environmental benefits,
­ O2 emissions may prove a win–win situation for sustainability.
the shift to lowering C
This research’s statistical estimations find that socio-economic sustainability is posi-
tively associated with ­CO2 emissions, and environmental sustainability is negatively related
to ­CO2 emissions in thirty IEA member countries. These findings suggest that policymak-
ers in the IEA economies establish policies that promote a sustained lifestyle, ecological
awareness, and clean technological innovations, and cut subsidies that are associated with
non-renewables in favor of backing investment in renewables. At the initial stage of trans-
formation, a substantial investment is a prerequisite for technological upgrades and the
development of renewable energy. These shifts from non-renewable to renewable energy
sources will create multiple positive externalities for these economies.

Appendix 1

See Table 9.

13
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 I. Khan, F. Hou

Table 9  List of IEA countries

Member countries
Australia Germany Norway
Austria Hungry Poland
Belgium Ireland Portugal
Canada Italy Slovak Republic
Czech Republic Japan Spain
Denmark Korea Sweden
Estonia Luxembourg Switzerland
Finland Mexico Turkey
France New Zealand United Kingdom
Greece Netherlands United States

Appendix 2

See Tables 10 and 11.

13
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The Impact of Socio-economic and Environmental Sustainability…

Table 10  Principal components for socio-economic sustainability indicators

Numbers Values Differences Proportions Cumulative-values Cumulative-
proportions

Eigenvalues: (sum = 7, average = 1)

Extracting 7 of 7 possible components
1 2.593334 0.740361 0.3705 2.593334 0.3705
2 1.852973 0.704084 0.2647 4.446307 0.6352
3 1.148889 0.458553 0.1641 5.595197 0.7993
4 0.690336 0.302903 0.0986 6.285533 0.8979
5 0.387433 0.086315 0.0553 6.672966 0.9533
6 0.301118 0.275203 0.0430 6.974085 0.9963
7 0.025915 – 0.0037 7.000000 1.0000
Variable PCA 1 PCA 2 PCA 3 PCA 4 PCA 5 PCA 6 PCA 7

Eigenvectors (loadings)
Population − 0.148746 0.410914 0.574871 − 0.486792 − 0.423935 0.235362 0.080399
growth
Research and − 0.264176 0.551651 − 0.106779 − 0.182533 0.742549 0.129625 − 0.113974
develop-
ment
expendi-
tures
Labor force 0.485648 0.406900 0.036002 0.285373 − 0.167446 0.035492 − 0.697529
Inflation, 0.066434 − 0.220624 0.801191 0.376210 0.402866 − 0.030959 0.014536
consumer
prices
Imports of − 0.487625 0.080900 − 0.087332 0.586275 − 0.203645 0.601957 0.022553
goods and
services
Final con- 0.475748 − 0.304814 − 0.062082 − 0.276038 0.192454 0.750205 0.029258
sumption-
expendi-
ture
Gross fixed 0.451336 0.461663 − 0.058622 0.294666 − 0.007092 − 0.020618 0.701729
capital
formation
Ordinary Population Research Labor Inflation, Imports of Final con- Gross fixed
correlations growth and devel- Force consumer goods and sumption- capital
opment prices services expenditure formation
expendi-
tures

Population 1.000000
growth
Research 0.399744 1.000000
and
develop-
ment
expendi-
tures
Labor force 0.078923 − 0.001888 1.000000

13
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 I. Khan, F. Hou

Table 10  (continued)
Ordinary Population Research Labor Inflation, Imports of Final con- Gross fixed
correlations growth and devel- Force consumer goods and sumption- capital
opment prices services expenditure formation
expendi-
tures

Inflation, 0.140787 − 0.302079 − 0.002151 1.000000

consumer
prices
Imports of 0.071159 0.318447 − 0.422018 − 0.082597 1.000000
goods
and
services
Final con- − 0.342229 − 0.510551 0.307412 0.100796 − 0.631987 1.000000
sumption-
expendi-
ture
Gross fixed 0.040838 0.127843 0.959696 − 0.089057 − 0.379169 0.239470 1.000000
capital
forma-
tion

13
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The Impact of Socio-economic and Environmental Sustainability…

Table 11  Principal components for environmental economic sustainability indicators

Numbers Values Differences Proportions Cumulative- values Cumulative-
proportions

Eigenvalues: (sum = 7, average = 1)

Extracting 7 of 7 possible components
1 2.328754 0.012628 0.3327 2.328754 0.3327
2 2.316126 0.878661 0.3309 4.644881 0.6636
3 1.437466 0.995389 0.2054 6.082347 0.8689
4 0.442077 0.134223 0.0632 6.524423 0.9321
5 0.307854 0.166244 0.0440 6.832277 0.9760
6 0.141610 0.115498 0.0202 6.973888 0.9963
7 0.026112 – 0.0037 7.000000 1.0000
Variable PCA 1 PCA 2 PCA 3 PCA 4 PCA 5 PCA 6 PCA 7

Eigenvectors (loadings)
Adolescent- 0.126562 0.576460 0.161916 − 0.017119 0.635787 − 0.465314 − 0.066508
fertility
rate
Forest area 0.576126 0.129979 − 0.343838 − 0.065973 − 0.087907 − 0.022710 0.721363
Natural 0.154955 − 0.533932 − 0.117999 0.644623 0.509885 0.007226 0.037523
resource
depletion
Mortality − 0.059778 0.554997 0.168100 0.673795 − 0.224569 0.387546 0.074322
rate
Non-renewa- 0.278539 − 0.125599 0.693989 − 0.267370 0.263847 0.509884 0.154715
ble energy
consump-
tion
Renewable 0.478335 − 0.153443 0.450125 0.216594 − 0.454473 − 0.504960 − 0.191299
energy
consump-
tion
Surface area 0.563993 0.135553 − 0.359365 − 0.086111 0.038376 0.343159 − 0.638552
Ordinary Adoles- Forest area Natural Mortality Non- Renewable Surface area
correlations cent-fertil- resource rate renewable energy
ity rate depletion energy consump-
consump- tion
tion

Adolescent- 1.000000
fertility
rate
Forest area 0.246853 1.000000
Natural − 0.600296 0.073564 1.000000
resource
depletion
Mortality 0.687794 − 0.009626 − 0.579191 1.000000
rate

13
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 I. Khan, F. Hou

Table 11  (continued)
Ordinary Adoles- Forest area Natural Mortality Non- Renewable Surface area
correlations cent-fertil- resource rate renewable energy
ity rate depletion energy consump-
consump- tion
tion

Non- 0.095726 − 0.005183 0.104015 − 0.102129 1.000000

renewable
energy
consump-
tion
Renewable − 0.016110 0.377093 0.275694 − 0.087209 0.704198 1.000000
energy
consump-
tion
Surface 0.250229 0.963451 0.078052 − 0.001812 0.003397 0.312585 1.000000
area

Appendix 3

See Table 12.

13
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 Table 12  Literature summary
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 Table 12  (continued)
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Qiang and Jian (2020) China, 2005–2018 Natural resource endowment, Resources Policy Resource curse” proposition is
institutional quality, and valid at the provincial level in
China’s regional economic China
growth
Rahman (2017) 11 Asian populous countries, Do population density, economic Renewable and Sustainable Energy use, exports, and popula-
1960–2014 growth, energy use and exports Energy Reviews tion density adversely affect
adversely affect environmental environmental quality
quality in Asian populous
countries?
I. Khan, F. Hou

Content courtesy of Springer Nature, terms of use apply. Rights reserved.

 Table 12  (continued)
References Sample Title Source Findings

Zafar et al. (2019) Asia–Pacific Economic Coop- From nonrenewable to renew- Journal of Cleaner Production Stimulating role of energy (renew-
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of research and development
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economic cooperation coun-
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Zafar et al. (2020) OECD countries, 1990–2015 How renewable energy con- Journal of Cleaner Production Stimulating role of renewable
sumption contribute to envi- energy consumption in shaping
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Zhang et al. (2018) 112 Chinese cities from Does environmental pollution Journal of Cleaner Production The impact of pollution on labor
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in China
Zhou et al. (2018) China, 1980–2014 Examining the socioeconomic Resources, Conservation and Socioeconomic factors exerted
determinants of ­CO2 emissions Recycling important influences in
The Impact of Socio-economic and Environmental Sustainability…

in China: a historical and determining the environmental

prospective analysis quality

13
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 I. Khan, F. Hou

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