The role of economic freedom in achieving the environmental sustainability for the highest economic freedom countries: testing the environmental Kuznets curve hypothesis

Abstract

In the study, the relationship between ecological footprint, economic freedom, renewable energy consumption, and economic growth is analysed under the scope of environmental Kuznets curve (EKC) hypothesis. Here, fifteen countries with the highest economic freedom for the period 1996-2018 are selected to more clearly underline the impact of economic freedom on the environment and examined, i.e., Australia, Canada, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Singapore, South Korea, Sweden, and Switzerland. The long-term relationship between the variables is examined using the panel cointegration test. According to the test results, it has been observed that the variables in the EKC model act together in the long run. According to the long-term estimation results, it is seen that economic freedom decreases the ecological footprint, namely, environmental degradation, in Canada, while it increases in Estonia. Furthermore, it is concluded that renewable energy reduces the ecological footprint in Australia, Denmark, Luxembourg, Norway, Singapore, and Switzerland. Nevertheless, it has been determined that the EKC hypothesis is valid for Canada, Denmark, and Singapore, but not for other countries.