New insight into decoupling carbon emissions from economic growth: Do financialization, human capital, and energy security risk matter?

• Published date: 01 August 2024
• Author: Paul Terhemba Iorember,Solomon Gbaka,Abdurrahman Işık,Chinazaekpere Nwani,Jaffar Abbas
• Date: 01 August 2024
• DOI: http://doi.org/10.1111/rode.13077

REGULAR ARTICLE

New insight into decoupling carbon emissions

from economic growth: Do financialization,

human capital, and energy security risk matter?

Paul Terhemba Iorember

1

| Solomon Gbaka

2

|

Abdurrahman I¸sık

3

| Chinazaekpere Nwani

4

| Jaffar Abbas

5

1

Department of Economics, Nile

University of Nigeria, Abuja, Nigeria

2

Department of Economics, Benue State

University, Makurdi, Nigeria

3

Department of Economics, Epoka

University, Tirana, Albania

4

Department of Economics and

Development Studies, Alex Ekwueme

Federal University, Ndufu-Alike, Ebonyi

State, Nigeria

5

School of Media and Communication &

Antai College of Economics and

Management, Shanghai Jiao Tong

University, Shanghai, China

Correspondence

Paul Terhemba Iorember, Department of

Economics, Nile University of Nigeria,

Abuja, Nigeria.

Email: paul.iorember@nileuniversity.

edu.ng

Abstract

Against the backdrop of persistent climate change and

deteriorating environmental pressure, this study inte-

grates financialization, human capital, and energy

security risks to provide new insight into decoupling

carbon emissions from economic growth. The study

employs annual panel data on the BRICS (Brazil, Russia,

India, China, and South Africa) countries for the period of

1990–2019. The research employs the C-S ARDL

approach and the Tapio decoupling index to assess the

decoupling status of the BRICS countries. In addition,

this study applies the recently developed Juodis,

Karavias, and Sarafidis Granger noncausality test for

robustness. The findings offer compelling evidence of an

inverted U-shaped curve, aligning with the environmen-

tal Kuznets curve hypothesis. Consequently, the results

confirm the decoupling of carbon emissions in the

BRICS nations. Furthermore, the Tapio decoupling

elasticity index confirms different carbon decoupling

statuses among the BRICS. The results show expansive

negative decoupling for Brazil, weak decoupling for

India and China, and strong decoupling for Russia and

South Africa. In terms of policy, achieving strong

decoupling status in the BRICS requires that financial

institutions' lending and investing strategies align

with environmental objectives. In addition, human

capital development policies such as increased

Received: 12 July 2023 Revised: 24 November 2023 Accepted: 28 November 2023

DOI: 10.1111/rode.13077

Rev Dev Econ. 2024;28:827–850. wileyonlinelibrary.com/journal/rode © 2023 John Wiley & Sons Ltd. 827

spending on education should be vigorously pursued

to empower people to lead sustainable development

projects.

KEYWORDS

carbon emissions, decoupling, energy security risk,

financialization, human capital, STIRPAT

1|INTRODUCTION

Environmental sustainability remains a cardinal target of the United Nations Sustainable

Development Goals. It encompasses various interconnected elements, including the advance-

ment of green growth, green recovery, energy conservation, climate actions, and the mainte-

nance of an optimal ecological footprint. These goals aim to ensure sustainable development

without simultaneously exacerbating environmental degradation. The term green recovery

particularly acquired prominence following the global recession in the wake of the COVID-19

pandemic. Green growth, or green economy, then requires that a decoupling of resource use be

prioritized to attain a win–win state between growth and environmental pollution as all econo-

mies often have optimum growth as their overriding macroeconomic goal (Nwani et al., 2023);

that is, the tendency to always achieve growth in an environmentally clean state. In this con-

nection, a green economy is often considered to be a low-carbon one (Balcilar et al., 2023;

Vaden et al., 2020), with sustainable development as its primary concern. Olivier and Peters

(2020) identified carbon dioxide (CO

2

) as the major greenhouse gas (GHG), occupying about

72% of the total atmospheric gas pollutants, with its rising and concomitant devastating conse-

quences on the environmental, health, or economic spheres of man. Implicitly imbued in

growth is always the construed notion of the necessary cross, often associated with the advance-

ment of environmental hazards.

Decoupling as a conservation strategy, therefore, implies the capacity to consciously compress

the volume of deployment and utilization of resources to attain economic growth while concur-

rently containing environmental degradation. This could be accomplished by striking a balance

between the amount of energy resources used for targeted growth levels and the corresponding

amount of CO

2

emitted into the atmosphere (Achuo et al., 2024; Usman, 2023). Sanyé-Mengual

et al. (2019) categorize decoupling into relative or absolute, resource-based or impact-oriented,

and production or consumption-based. Given the rising cataclysmic influence of growth on the

environment, several individual countries and organizations are committed to promoting the

green economy initiative. Such organizations include the Paris Agreement 2015 and its following

editions with the target of reducing global average temperature to below 20C, the Organization

for Economic Co-operation and Development (OECD), the World Bank, and the World Nature

Organization. However, the process of transitioning to a low-carbon economy may require huge

capital investment,accessibility to low-cost financial resources, a high rate of knowledge assimila-

tion, and market leadership in clean energy technology (Paroussos et al., 2020).

Financialization, which relates to the totality of the expansion in the scope, relevance, and per-

formance of finance, financial institutions, and markets, provides a formidable and intermediating

role in explaining the decoupling behavior of an economy (Acheampong, 2019;Iorember

et al., 2020;Jiakuietal.,2023; Ozili & Iorember, 2023;Wangetal.,2022). As a critical component

828 IOREMBER ET AL.