How Do Education Spending and Economic Factors Affect Carbon Emissions in ASEAN Countries? The Moderating Role of Regulatory Quality and GMM Approach
DOI:
https://doi.org/10.55981/jep.2024.858Keywords:
FDI, Aid, Islamic Capital Market, Education Spending, Carbon EmissionsAbstract
Carbon emissions are an urgent global environmental issue, particularly for ASEAN countries such as Indonesia, Malaysia, Singapore, Thailand, and the Philippines, which face significant challenges in reducing them. This study examines the impact of Government Expenditure on Education, economic growth, foreign direct investment (FDI), foreign aid, and the Islamic Capital Market (ICM) on carbon emissions in ASEAN countries, while considering the moderating effect of regulatory quality. The research employs panel data analysis using the Generalised Method of Moments (GMM) to address potential endogeneity and dynamic relationships, and Moderated Regression Analysis (MRA) to examine the interaction effects of regulatory quality. Data were collected through purposive sampling for the period 2011 to 2021. The results indicate that FDI has a significant positive impact on carbon emissions, whereas Foreign Aid and Government Expenditure on Education have a mitigating effect on emissions. Interestingly, ICM has a positive influence on carbon emissions, contrary to expectations. This may reflect the limited integration of environmental considerations in Islamic financial instruments in the region. Regulatory quality significantly moderates only the relationship between Foreign Aid and carbon emissions, indicating its selective role in shaping environmental outcomes. The novelty of this study lies in its integrated examination of conventional and Islamic financial indicators, as well as regulatory quality, in the ASEAN context, an area that remains underexplored. Based on the findings, it is recommended that policymakers strengthen environmental regulations to mitigate the negative impacts of FDI, while encouraging reforms to enhance the ecological responsibility of Islamic capital market practices. Further research is needed to explore institutional and financial mechanisms that can align investments with sustainability goals.
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