Does economic complexity help in achieving environmental sustainability? New empirical evidence from N-11 countries

In view of the SDGs argued by UNO, it is vital to address the pressing issues regarding sustainable development. The aim of current study is to investigate the impact of economic complexity (ECC) on environmental sustainability. To achieve this aim, we sampled the 25 years of data of Next-11 countries over the period 1995 to 2019. The economic complexity was measured by the economic complexity index (ECI) while environmental sustainability was measured by two proxy variables including CO₂ and greenhouse gas (GHG) emissions. The empirical analysis was established by utilizing the unit root test, cointegration test, FMOLS (fully modified OLS) and DOLS (dynamic OLS) models. The estimated coefficient values disclosed that ECC has a negative and statistically significant relationship with both CO₂ and GHG emissions in the long run, implying that ECC ensured environmental sustainability. In addition, the analysis reveals that financial development has a negative while economic growth and energy imports have a positive and statistically significant association with both CO₂ and GHG emissions. The findings of the current study suggested an important policy regarding the focus on ECC for achieving environmental sustainability in underlying economies. This study provides robustness to the existing literature in alternative data settings (N-11 countries) and by the unique objective of focusing on environmental sustainability.