Energy Strategy Reviews (May 2024)
Do natural resources bestow or curse the environmental sustainability in Cambodia? Nexus between clean energy, urbanization, and financial deepening, natural resources, and environmental sustainability
Abstract
The management and utilization of natural resources can either promote or hinder environmental sustainability. While they can provide the basis for renewable energy, sustainable agriculture, and conservation efforts, their extraction and use can also lead to environmental degradation, pollution, and depletion. This study examines the intricate relationship between natural resource rent (NRR) and environmental sustainability in Cambodia. Specifically, the study investigates the impacts of financial openness, institutional quality, financial deepening, and urbanization on this relationship. Employing both symmetric and asymmetric frameworks, the research assesses the explanatory power of these variables on environmental sustainability. Study implemented novel cointegration test offered by Bayer-Hancked and Makki, the long-run and short-run coefficients has derived through the implementation of augmented autoregressive Distributed Lagged (AARDE) and Nonlinear Autoregressive Distributed Lagged (NARDL). The study reveals the long-term association between NRR and environmental indicators, additionally the findings uncover both positive and negative correlations between NRR and environmental sustainability, emphasizing the challenge of managing natural resources effectively. Furthermore, the study highlights the potential adverse environmental effects of financial expansion, suggesting that increased investment in certain industries and higher consumption patterns may exacerbate environmental degradation. It also underscores the role of foreign direct investment (FDI) in promoting renewable energy technologies and sustainable practices, ultimately reducing CO2 emissions. Additionally, the study stresses the importance of institutional quality and transparent financial systems in encouraging sustainable practices and mitigating carbon emissions. It advocates for Cambodia to prioritize institutional strength and financial openness to achieve long-term environmental sustainability, while addressing the challenges posed by financial deepening and urbanization.
