Environmental Sustainability in India: The Effects of Financial Development and Green Energy on Ecological Footprint

In this study, environmental sustainability is investigated through the ecological footprint variable in India from 1965 to 2018. In this context, the impact of renewable energy use, financial development, urbanization and economic growth on India's ecological footprint is analyzed. Since all variables were stationary at the first difference, the cointegration relationship between variables was tested with Gregory-Hansen and Hatemi-J cointegration tests. Empirical findings have shown that there is a long-term relationship between the variables in the relevant period. FMOLS, DOLS, and CCR estimators were used to determine the direction and magnitude of the effect of the explanatory variables on the dependent variable. The estimation results found that while economic growth increased the ecological footprint the most, financial development decreased the most. In addition, the increase in urbanization increases environmental degradation. However, although the use of green energy is not at the desired level, it increases the environmental quality. On the other hand, the study tests the EKC hypothesis for India. Research results support that there is an inverted-u-shaped relationship between economic growth and ecological footprint. Therefore, for India, whose GDP is integrated with fossil fuels, higher growth at the beginning causes more fossil fuel use and negatively affects environmental quality. On the other hand, increasing urbanization in India, which has an underdeveloped energy infrastructure, increases environmental degradation. However, increasing renewable energy and financial development offer significant opportunities to reduce the ecological footprint.