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Sustainability challenges in Peru: embossing the role of economic integration and financial development—application of novel dynamic ARDL simulation

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Abstract

Inspired by the commitment to address the environmental challenges in Peru under the UN Sustainable Development Goals 13 (Climate Action) and its implications by 2030, therefore, this study investigates the combined role of economic globalization, financial development, and fossil fuel intensity consumption using a combination of dynamic ARDL counterfactual simulation and kernel-based regularized least squares within the context of Stochastic Impact by Regression on Population, Affluence and Technology over the period 1971–2017. This research output confirms the inverted-U-shaped hypothesis between economic growth and carbon emissions. In contrast, the kernel-based regularized least squares confirms the scale effect and fossil curse hypothesis in the relationship between financial development and carbon emission, and heterogeneous effects in economic integration and carbon emission. We further document that financial development, fossil fuel consumption, urban population, affluence (economic growth), and government final consumption expenditure spur environmental pollution while economic integration reduces it. This study recommends Peru to instill environmental justice through regulations and policies restricting inflows into an exploration of environmentally unsustainable projects within Peruvian metropolises or in the Peruvian Amazon. There is a need to revisit finance and investment laws and increase investment in low-carbon infrastructure within Peru.

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Authors and Affiliations

  1. Department of Economics, Banking and Finance, Gregory University, Uturu, Abia State, Nigeria

    Kingsley Ikechukwu Okere

  2. Department of Economics, Evangel University, Akaeze, Ebonyi State, Nigeria

    Favour Chidinma Onuoha

  3. Department of Finance, University of Lagos, Akoka, Yaba, Nigeria

    Obumneke Bob Muoneke

  4. Department of Economics, Abia State University, Uturu, Nigeria

    Nnamdi Chinwendu Nwaeze

Authors
  1. Kingsley Ikechukwu Okere
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  2. Favour Chidinma Onuoha
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  3. Obumneke Bob Muoneke
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  4. Nnamdi Chinwendu Nwaeze
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Contributions

Kingsley Ikechukwu Okere: conceived and designed the analysis, collected the data, performed the analysis

Favour Chidinma Onuoha: organized and supervised the course of the project or the article and took the responsibility; wrote the theoretical literature; collected the data

Obumneke Bob Muoneke: wrote the empirical literature, performed the analysis, funding—provided personnel, environmental and financial support, and tools and instruments that are vital for the project

Chinwendu Nnamdi Nwaeze: collected the data, planned methodology to reach the conclusion, constructed the idea or hypothesis for the research and/or manuscript

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Correspondence to Kingsley Ikechukwu Okere.

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Okere, K.I., Onuoha, F.C., Muoneke, O.B. et al. Sustainability challenges in Peru: embossing the role of economic integration and financial development—application of novel dynamic ARDL simulation. Environ Sci Pollut Res 29, 36865–36886 (2022). https://doi.org/10.1007/s11356-021-17756-0

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