Environmental Sustainability in EU and BRICS Economies: Long-Run, Heterogeneous, and Causal Dynamics

Environmental sustainability is a fundamental prerequisite for achieving long-term economic growth and sustainable development. This study comparatively examines the determinants of environmental degradation in EU and BRICS economies over the period 1995-2021. Specifically, it analyzes the effects of fossil energy consumption, renewable energy consumption, economic growth, industrialization, and natural resource rents on environmental degradation. To provide a comprehensive empirical framework, the PMG-DFE ARDL approach is employed to capture short- and long-run dynamics, while the CS-ARDL approach is used as a robustness check against potential cross-sectional dependence. In addition, simultaneous quantile regression is applied to examine heterogeneous effects across different emission levels, and the Emirmahmutoğlu and Köse (2011) panel causality test is used to identify directional causal relationships among the variables. The findings reveal that the determinants of environmental degradation differ between EU and BRICS economies. The long-run results indicate that fossil energy consumption, industrialization, and natural resource rents increase environmental degradation in both groups, whereas economic growth has a mitigating effect. Renewable energy reduces environmental degradation in the EU but does not exert a significant mitigating effect in BRICS economies. The error-correction coefficients show that adjustment toward the long-run equilibrium occurs faster in the EU than in BRICS. The quantile regression results further indicate that fossil energy remains the primary driver of emissions in both groups, although its effects vary across emission levels. The causality results reveal bidirectional causal linkages between environmental degradation and the explanatory variables. Overall, the findings suggest that differentiated policy strategies are needed to enhance environmental sustainability in EU and BRICS economies.