Original Article

Energy & Environment

1–23
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validity of LCC hypothesis

Zhenzhen Feng1, Farah Durani2, Ahsan Anwar3,4 ,

Paiman Ahmad5, Qasim Raza Syed6,7
and Ali Abbas8

Abstract
Since the United Nations endorsed the sustainable development goals in 2015, emerging econ-
omies have faced several issues in meeting the objectives set by the sustainable development
goals. Environmental degradation is one of the main issues faced by emerging countries. To over-
come this issue and for attaining sustainable development goals, this study is the earliest attempt to
examine the asymmetric influence of economic policy uncertainty, renewable energy consump-
tion, and technological innovations on load capacity factor under the framework of the load cap-
acity curve for E-7 countries during 1996–2019. The preliminary tests confirm the absence of data
normality; hence, we use panel quantile regression. The findings of the study reveal the presence
of a U-shaped load capacity curve hypothesis in E-7 countries including China, Indonesia, Russia,
Brazil, Mexico, India, and Turkey. This finding depicts that at an earlier stage, gross domestic prod-
uct has an adverse influence on environmental quality but after achieving its threshold level, a fur-
ther increase in gross domestic product growth becomes helping to boost environmental quality.
An increase in economic policy uncertainty leads to a decrease in load capacity factor while
renewable energy consumption has a favorable impact on load capacity factor to enhance

1
School of International Trade and Economics, University of International Business and Economics, Beijing, China
2
Department of Finance, College of Business Administration, University of Business and Technology, Jeddah, Saudi Arabia
3
UCSI Graduate Business School, UCSI University, Kuala Lumpur, Wilayah Persekutuan, Malaysia
4
European University of Lefke, Lefke, Northern Cyprus, TR-10 Mersin, Turkiye
5
University of Raparin, Ranya, Kurdistan Region, Iraq
6
Universiti Sains Malaysia, Penang, Malaysia
7
Faculty of Management Sciences, Department of Business Administration, ILMA University, Karachi, Pakistan
8
National College of Business Administration and Economics, Lahore, Pakistan
Corresponding author:
Farah Durani, Department of Finance, College of Business Administration, University of Business and Technology, Jeddah,
Saudi Arabia.
Email: farahdurani@gmail.com
2 Energy & Environment 0(0)

environmental quality. The negative impact of technological innovation is that prevailing technology
patterns are not environmentally supportive. Relying on these empirical outcomes current study
recommends significant policy measures to achieve the targets of sustainable development goals
including SDG 07, SDG 08, SDG 09, and SDG 13 as renewable energy, economic growth, innova-
tions, and climate action, respectively, in E-7 economies.

Keywords
Load capacity curve hypothesis, load capacity factor, economic policy uncertainty, sustainable
development goals

Introduction
Nowadays, climate change and environmental degradation have become alarming threats to global
sustainability and prosperity. Rising natural resource demand has caused numerous environmental
issues including global warming, biodiversity loss, water contamination, soil pollution, and air pol-
lution.1 To attain the sustainable development goals (SDGs), economies are now committed to
enhancing environmental sustainability as a primary objective. Globally, governments are collab-
orating to practice various measures aimed at preventing further downfall in environmental quality.
These initiatives include the Kyoto Protocol established in 1998 to lessen greenhouse gas (GHG)
emissions, the 1989 Montreal Protocol centered on the gradual elimination of ozone-depleting sub-
stances, and the 2016 Paris Agreement designed to control environmental issues. Despite the col-
lective initiatives represented by these agreements, there has been a notable and ongoing decline in
environmental quality.
To ensure a sustainable environment, researchers have investigated responsible factors for envir-
onmental quality through different measures of environmental degradation such as CO2 emissions,
GHG emissions, and ecological footprint (EF). The ecological footprint, calculated in global hec-
tares, primarily functions as a metric for assessing population consumption sustainability.
Moreover, these proxies for environmental degradation to capture the degree of human influence
on the environment, do not consider nature’s response to such degradation.2 Recognizing this
aspect, Siche et al.3 proposed the load capacity factor (LCF), calculated as the ratio of biocapacity
(BC) to EF. This framework aims to offer a better understanding of the linkage between human
consumption and the Earth’s capacity to regenerate resources sustainably.
In previous studies, most of the researchers have analyzed the nonlinear effect of income on
environmental degradation which originally was introduced by Grossman and Krueger.4 This
U-shaped income-degradation is named as environmental Kuznets curve (EKC). However, the
load capacity curve (LCC) hypothesis is a nonlinear association between income and LCF. The
LCC is presented as a U-shaped phenomenon. The LCC hypothesis is presented in Figure 1. On
the X-axis is income and on the Y-axis is LCF. The curve is in negative slope at the initial stage
but after the inflection point, it becomes positive. This highlights that at an early stage of
income, LCF decreases but after a threshold level further rise in income level leads to an uplift
in LCF and environmental quality.
The LCF plays a crucial role in quantifying the availability and demand of ecological assets in
measures of global hectares, establishing a limit for sustainability. By incorporating factors of
environmental quality (BC) and degradation (EF), the LCF offers a more precise assessment of
the sustainability level. Whereas Figure 4 illustrates the stark contrast between the E-7 economies’
BC and ecological footprint. The E-7 economies are facing a pressing environmental challenge
Feng et al. 3

Figure 1. Load capacity curve. Source: Drawn by Author.

characterized by low BC and a high ecological footprint. BC indicates an ecosystem’s capacity to

yield resources and absorb waste, while the EF measures the demand placed on nature by human
activities. Rapid industrialization, population growth, and consumption patterns have led to an eco-
logical overshoot, where demand exceeds nature’s capacity to replenish resources and absorb
waste. Unsustainable practices, such as heavy reliance on fossil fuels and inadequate waste man-
agement, cause environmental degradation, including air and water pollution, biodiversity loss,
and soil degradation. The BC trends among E-7 countries are presented in Figure 2. A high BC
level is shown in the case of Russia and Brazil. Moreover, the BC trend in Brazil is comparatively
higher than in Russia from 1996 to 2019 while in Russia, a persistent increase in BC is observed.
Other countries possess lower levels of BC including India, Turkey, China, Indonesia, and Mexico
which highlights their deficiency in LCF. On the other hand, EF trends are shown in Figure 3.
Russia is facing severe conditions with alarming levels of EF among all E-7 nations. Entirely all
countries in the region have shown an increasing trend of EF from 1996 to 2019. However,
India and Indonesia have low EF levels among E-7 economies. Additionally, the ecological
deficit among E-7 nations is shown in Figure 4. The bottom of the figure represents the BC of
E-7 nations which does not show any valuable increase during the last three decades. The upper
surface in the figure shows EF with an alarming rise in E-7 nations.
Following the Eurozone debt crisis in 2009 and the worldwide financial crisis in 2008, there has
been considerable focus from governments, researchers, and economists on economic policy uncer-
tainty (EPU). Functioning as an institutional aspect, EPU has substantial influences on economic
activities and production structures. Many recent studies have explored the adverse role of EPU
for gross domestic product (GDP) growth,6,7 financial development,8,9 and environmental
quality.2,10,11 Jiang et al.12 demonstrated that EPU has the potential to harm environmental quality
in the following three ways. Firstly, EPU can divert government attention away from environmental
concerns, leading to a negative effect on the implementation of environmental regulations.
Consequently, environmental protection measures may suffer. Secondly, EPU can result in a deteri-
oration of the economic performance of enterprises. This, in turn, may lead to reduced exploitation of
4 Energy & Environment 0(0)

Figure 2. Biocapacity trends of E-7 countries. Data Source: Global Footprint Network.5

Figure 3. Ecological footprint trends of E-7 economies. Data Source: Global Footprint Network.5 Produced
By: Author.

natural resources and decreased energy usage. Yet, if companies opt for cheaper but more polluting
energy sources in response to EPU, then higher pollution levels could arise. Thirdly, firms might
lessen their commitments to carbon emission control if they anticipate government relaxation of
Feng et al. 5

Figure 4. Ecological insufficiency of E-7 economies. Data Source: Global Footprint Network.5 Produced By:
Author.

environmental regulations during periods of severe EPU. Likewise, Yu et al.13 highlighted that EPU
adversely affects the environment through energy intensity and dependence on fossil fuels.
Moreover, the crucial role of technological innovation in enhancing productivity and economic
growth has been examined in various studies.14–17 The studies indicate that technology innovation
can effectively mitigate environmental deterioration by managing waste effectively, fostering resource
efficiency, implementing pollution control measures, utilizing renewable energy sources, and enhancing
environmental monitoring practices.18,19 Nevertheless, there is conflicting evidence regarding the effect
of technological advancement on environmental quality. Several studies provide insights into how
technological advancements can lead to a decline in carbon emissions.20,21 One example is the imple-
mentation of strict environmental regulations, which has spurred the emergence of targeted innovations
aimed at addressing carbon emissions.22 Wahab et al.23 and Cheng et al.24 are among the scholars who
provide credible explanations supporting this viewpoint. While new technologies can enhance resource
efficiency, it is essential to consider the diminishing marginal returns associated with these innovations,
as well as the expanding economic scale that may demand greater investment in natural resources.
However, it is imperative to examine the influence of technological innovation on LCF to capture its
broader role in the environment.
Besides the aforementioned factors, the literature provides evidence regarding the favorable role
of renewable energy in restoring energy security and highlights climate change problems.2,25
Renewable energy sources have the potential to accomplish approximately half of the world’s
energy demand by the year 2050, thereby preventing potentially harmful effects on the climate
structure caused by human activities.26,27 The studies have consensus that renewable energy can
6 Energy & Environment 0(0)

mitigate environmental pollution.2,28 Updated strategies are suggested to enhance the share of
renewable energy use in total energy usage for sustainable development.29,30
This research makes significant contributions to the prevailing literature in numerous ways.
First, this is the earliest study, which investigates the LCC hypothesis in E-7 economies.
Second, this research uses panel quantile regression (QR). The QR method has several advantages
over the conventional mean-based econometric methods, such as it permits a comprehensive under-
standing of the factors influencing sustainable resource utilization by examining relationships at dif-
ferent quantiles of the data, capturing specific thresholds and variations. Additionally, it accounts
for heterogeneity and time-varying effects within the panel data, enhancing the accuracy and reli-
ability of the analysis. Thirdly, this study is a pioneering attempt that investigate whether the current
pattern of emerging economies is in the right direction or unsustainable. Fourthly, we calculated the
new dataset of renewable energy usage by combining the Wind, Solar, Nuclear, and Hydro Energy
data obtained from British Petroleum statistics. By examining the association between renewable
energy usage and the LCF, we aim to provide valuable insights into the efficiency and sustainability
of such energy sources. This research is driven by the recognition that as the global transitions
towards high dependence on renewable energy, an in-depth understanding of its real-world
effect becomes crucial. Lastly, the current research advocates appropriate policy implications to
achieve the targets of SDG 07 (renewable energy), SDG 08 (GDP growth), SDG 09 (innovations),
and SDG 13 (climate action).

Literature review
Theoretical framework
The linkage between GDP growth and environmental quality has been broadly studied. However,
the influence of GDP on environmental indicators is not always linear. In the context of LCF, it is
proposed that the relationship exhibits a U-shaped curve. On the one hand, as GDP grows, there is a
parallel upsurge in energy usage and environmental pressure, causing to adverse effect on LCF.
This negative effect can be attributed to the intensification of industrial activities, increased resource
extraction, and higher emissions associated with GDP growth. While the positive influence of GDP
square on LCF suggests a potential threshold effect. As the economy continues to grow and reaches
a certain level of development, environmental consciousness, technological advancements, and
policy interventions may come into play, leading to a positive influence on LCF. This U-shaped
association aligns with EKC hypothesis,4 which shows GDP-CO2 linkage in an inverted
U-shaped. The LCC hypothesis (EKC-extended), shows a threshold where environmental quality
increases as GDP improves. According to this EKC theory, as nations progress economically,
they initially experience environmental deterioration due to increased production and consumption.
However, beyond a certain threshold, environmental consciousness, and technological advance-
ments facilitate a transition toward sustainable development and improved environmental
quality. However, the linkage between economic growth, as represented by GDP, and environmen-
tal quality is complex and multifaceted. Distinctive outcomes are found in recent studies regarding
the existence of LCF.31,32
This negative impact can be attributed to the intensified industrial activities, increased emissions,
and heightened ecological footprint associated with economic growth. However, as the economy
continues to expand and reaches a certain threshold, there may be a shift in the relationship. This
shift can be attributed to various factors, including environmental consciousness, technological
advancements, and policy interventions. At this turning point, represented by GDP square, the
Feng et al. 7

positive impact on LCF begins to manifest. As GDP square increases, environmental awareness and
sustainability practices become more prominent, leading to improvements in energy efficiency, renew-
able energy adoption, and ecological conservation efforts. These developments contribute to a positive
influence on LCF, indicating a more efficient utilization of ecological resources and a reduced environ-
mental footprint. The Load Capacity Curve (LLC) hypothesis is further explained in Figure 5.
In addition to GDP, the present study considers the significance of the EPU as a crucial deter-
minant of LCF. EPU is identified as a factor that can exert an unfavorable influence on the LCF.
While prior research has extensively explored the effect of EPU on CO2 emissions and EF (e.g.
Su et al.,10 Malik et al.,16 Anser et al.,33 and Shabir et al.34) there exists a research gap concerning
its link with LCF. The Uncertainty surrounding economic policies, such as changes in regulations,
tax incentives, and subsidy programs, creates a climate of instability for businesses, investors, and
energy infrastructure development. This uncertainty hampers long-term planning and investment
decision-making processes, leading to delays or cancellations of renewable energy projects and
energy infrastructure upgrades.
Consequently, the lack of transparency and predictability in economic policies can discourage
investments by the private sector in environment-friendly technologies, causing in weak transition
to sustainable energy sources and reduced energy efficiency improvements. Moreover, EPU can
lead to a volatile investment environment, deterring the deployment of financial resources
towards energy efficiency initiatives and renewable energy installations. Uncertainty about future
policy direction may undermine investor confidence, increase the cost of capital, and hinder the
accessibility of financing options for sustainable energy projects. As a result, the implementation
of energy-efficient measures and the adoption of renewable energy technologies may be
impeded, reducing the LCF.

Figure 5. Theoretical evidence for LLC hypothesis.

8 Energy & Environment 0(0)

Additionally, SDGs can disrupt regulatory frameworks, impede the establishment of supportive
infrastructure, and create barriers to the effective management of environmental resources.
Inconsistencies and fluctuations in policies related to environmental protection, emission standards,
and conservation measures can lead to inefficiencies in resource allocation and usage. This can
further deteriorate the LCF by hindering the optimization of energy production, transmission,
and distribution systems. Figure 6 shows the theoretical nexus of EPU with LCF.
Technology innovation plays a crucial role in shaping the LCF by driving improvements in energy
efficiency, renewable energy generation, and grid management.35,36 Technological advancements
lead to the development of more efficient and cleaner energy technologies, such as advanced solar
panels, wind turbines, and energy storage systems. These innovations enhance the generation and
use of renewable energy methods, thereby falling dependence on fossil fuels and decreasing environ-
mental impact. Moreover, Technological innovation can adversely affect the LCF by increasing
resource consumption and contributing to environmental degradation.37 Increased demand for
energy and materials can strain ecological systems,38 while pollution and habitat destruction asso-
ciated with certain technologies can reduce BC, lowering the LCF. However, technological innova-
tions can contribute to the optimization of energy production, transmission, and distribution
systems.39 Smart grid technologies, intelligent energy management systems, and real-time monitoring
systems enable more efficient allocation and utilization of energy resources, leading to increased LCF.
These advancements facilitate better grid integration of renewable energy sources, enhance load bal-
ancing, and improve overall grid reliability and stability. Additionally, technology innovation fosters
the deployment of demand-side management techniques and energy-efficient solutions in various
sectors. Energy-efficient appliances, smart buildings, and advanced industrial processes help to
reduce energy consumption and peak demand, further improving the LCF.40 By leveraging technol-
ogy, it becomes possible to unlock the potential for demand response programs, time-of-use pricing,
and energy conservation measures, resulting in a more balanced and optimized energy grid.

Empirical evidence
This section provides a comprehensive summary of the recent research highlighting the environmen-
tal impact of various responsible factors, including GDP, EPU, TIN, and RENE. Understanding the

Figure 6. Load capacity factor and economic policy uncertainty (EPU) Nexus.
Feng et al. 9

empirical nexus between these variables is significant for examining the changes in environmental
quality. Moreover, this section develops empirical foundations for further econometric analysis.

Environmental quality and economic growth. Several studies have examined the association between
GDP and environmental degradation to evaluate the EKC hypothesis among individual economies
and panels of global nations. For instance, Massagony and Budiono41 examined the nonlinear effects
of GDP on carbon emissions in Indonesia. Findings reveal of EKC hypothesis and suggested the use
of RENE to enhance environmental quality. Pata and Yurtkuran42 showed mixed outcomes for EKC
by using Fourier ARDL approximations. The study concludes that EKC is present in Denmark and
Switzerland but invalid in the case of Austria and Sweden. Additionally, Al-Mulali et al.43 examined
EKC validity among 170 global nations. Interestingly, the study found that EKC was valid among
countries where government effectiveness was moderate or high. However, EKC was not present
in low government effectiveness nations. The study highlighted the role of effective government pol-
icies for sustainable development. Instead of using conventional measures of environmental quality,
the present study has used a comprehensive proxy of LCF and nonlinear GDP effect in this concern
named U-shaped LCC hypothesis (extended EKC) among E-7 economies. Wu et al.2 validated the
existence of LCC among fast-growing nations. Moreover, the adoption of renewable energy was
also advocated in the study to improve LCF. Dogan and Pata44 investigated the environmental
impact of income, R&D, and renewable energy usage among G-7 nations. Results confirmed the
existence of the LCC hypothesis. R&D and renewable energy usage also show a favorable role in
improving LCF. Likewise, Afshan and Yaqoob45 depicted the presence of the LCC framework for
emerging economies for the dataset covering a time span of 2000–2018. Pata and Ertugrul31 analyzed
the impact of GDP on LCF in India during 1988–2018. Empirical outcomes showed a significant
positive influence of globalization and human capital on LCF. A nonlinear U-shaped linkage
between GDP and LCF was present. In contrast, Alola et al.46 found that the LCC hypothesis was
not valid for a time period of 1965–2018. Results also revealed adverse effects of trade and financial
development. For E-7 countries, Bekun et al.47 found a nonlinear GDP-CO2 emissions nexus and con-
firmed the existence of the EKC hypothesis. They stated that the adverse impact of GDP on environ-
mental quality is due to fossil fuel usage during earlier stages of GDP growth in E-7 countries while as
economies approach their threshold level then further increase in GDP brings improvement in envir-
onmental quality. Such improvement was due to the utilization of renewable energy.`

Environmental quality and EPU. Recently, EPU has gotten much attention from researchers regarding
its environmental implications. Wu et al.2 examined the environmental impact of EPU and renew-
able energy usage on LCF among fast-growing nations. Results of panel quantile regression showed
a negative influence of EPU on LCF, particularly in lower quantiles. The impact of renewable
energy usage was supportive to improve LCF. Among E-7 economies, Xu et al.48 found a positive
link between EPU and EF. The study depicted that due to EPU, E-7 nations faced investment fluc-
tuations and dependence on conventional polluting energy sources which increased the EF.
Moreover, Adedoyin and Zakari49 analyzed the consequences of EPU on CO2 emissions in the
UK. Outcomes depicted that EPU reduced the emissions in the short run but caused more environ-
mental degradation in the long run. The study suggested reducing EPU and adopting cleaner energy
sources to improve environmental quality. According to Xue et al.,50 EPUs caused more carbon
emissions in France. Based on empirical outcomes, the study advocated that the government
should be involved in increasing awareness and discussion with its citizens to address the signifi-
cance of environmental policies. Likewise, Amin and Dogan51 depicted a direct association between
EPU and environmental degradation. Furthermore, Anser et al.33 stated that EPU has a carbon
10 Energy & Environment 0(0)

emissions-reducing role among the top 10 carbon-emitting nations. The study suggested that nations
practice policies for the utilization of RENE and innovations to achieve a sustainable environment.
For manufacturing companies in China, Yu et al.13 explored the adverse effect of EPU on carbon emis-
sions. Energy intensity and fuel mix were found as responsible channels for harming the effects of EPU
on emissions. Jiang et al.12 examined the causality link between EPU and CO2 in the USA. Outcomes
revealed a causality link running from EPU to carbon emissions. The study highlighted the significance
of stable economic policies to improve environmental quality. By using the GMM method, Su et al.10
examined the environmental effect of EPU among 137 countries and depicted that EPU adversely
affects environmental quality. Likewise, Assamoi and Jiang et al.12 showed that businesses highly
depend on traditional energy sources in the existence of an uncertain economic environment.
Assamoi and Wang11 also revealed the increasing influence of EPU on environmental degradation in
China and the USA. The effect of policy stringency was supportive of reducing emissions.

Technological innovation and environmental quality. Few studies are present in the recent literature, that
have examined to influence of technology innovation on LCF. Zhao et al.52 highlighted the role of
technological innovation (TIN) on LCF among BRICS-T nations during 1990–2018. By applying
CS-ARDL, the study showed a significant positive influence of TIN on environmental quality by
improving LCF. Moreover, Jahanger et al.53 analyzed the interactive contribution of TIN and renew-
able energy usage with LCF among the top 10 SDG nations for a time span of 1994–2018. Applying
the MMQR method, the study revealed a positive impact of interactive terms by uplifting LCF.
Additionally, a positive linear influence of GDP was also found. However, Ibrahim and Vo37
conducted a study among 27 advanced economies and revealed that initially, technological
innovation supports the environmental quality but after reaching a threshold point it lowers
the environmental quality. Examining the effect of various factors on CO2, Gyamfi et al.54 inves-
tigated BRICS economies from 1990 to 2019. Findings highlighted the favorable effect of TIN
and renewable energy in reducing emissions. The TIN becomes a more useful factor to improve
environmental quality. Numerous studies have emphasized on production of bioenergy for sus-
tainable development.55–58
Chen and Lee1 analyzed the link between carbon emissions, TIN, and R&D intensity across 96
global economies from 1996 to 2018. Employing spatial econometric methods, they found that the
mitigation effect of technological innovation on CO2 emissions was not statistically significant.
Sinha et al.59 explored the relationship between TIN and environmental quality in the N11 nations
for a time span of 1990–2017, revealing a significant impact with negative influence observed in
lower and medium quantiles, and positive influence in higher quantiles. Lastly, Islam et al.60 assessed
the role of TIN, globalization, and GDP growth on environmental quality in Bangladesh from 1972 to
2016. Their findings indicated the adverse effect of energy consumption, trade, and urbanization on
environmental quality, while technological innovations played a supportive role in enhancing envir-
onmental quality within the context of Bangladesh. Technological innovation was found a supportive
tool to reduce carbon emissions in E-7 nations.61 They further highlighted that technological innov-
ation helped E-7 nations to build an eco-friendly production environment.

Methods
Data and methodology
The present study analyzes the impact of GDP, GDP2, EPU, renewable energy consumption, and
technology innovation on environmental quality among E-7 nations. LCF is utilized as a
Feng et al. 11

comprehensive proxy for environmental quality. The model of the study takes the following econo-
metric form (equation (1)).
LCFit = α + β1 GDPit + β2 GDP2it + β3 EPUit + β4 TINit + β5 RENEit + εit (1)
Equation (1) represents a constant term denoted as α, and the coefficients of the independent vari-
ables are expressed as β1 , β2 , β3 , β4 , and β5 . The error term and time period are shown as “ϵ” and
“t,” respectively. Comprehensive details regarding the variables and dataset source are outlined in
Table 1.
Table 2 provides descriptive statistics for the variables utilized in this study, presenting a
summary of their characteristics including mean, median, minimum, maximum, skewness, and
Jarque–Bera mean values are 1.061 (LCF), 8.562 (GDP), −1.512 (EPU), 9.852 (TIN), and 0.197
(RENE). Median values for the aforementioned sequence of variables are 0.538, 8.994, −1.361,
9.754, and 0.109 while Jarque-Bera values are 99.23, 21.17, 277, 26.49, and 22.71.
The P-values obtained from the Jarque–Bera test are below 0.05, showing that the dataset
does not follow a normal distribution. Moreover, visual inspection of the graphs further sup-
ports the presence of outliers and affirms the lack of normality in the data. Given the non-
normal distribution, relying on linear regression may yield spurious or misleading conclusions.
So, the study used the panel QR method to address the non-normality in the data. Figure 7
depicts the frequency distribution of the dataset of the study. Most of the LCF values are
between 0.4 and 1.4. Entirely low LCF is observed as only a few values are in the range of
2.8–3.8. For GDP growth, data shows that most of the values lie between 8.8 and 9.6.
Values of EPU are most probably in the range of 0 to −3. Technological innovation shows
its high frequencies in the range of 8–11. Lastly, the range of maximum values of RENE is
between 0 and 1.

Panel QR model
In this study, the QR method is employed to investigate how independent variables affect LCF. The
utilization of QR, initially proposed by Koenker and Bassett,65 goes beyond the conventional least

Table 1. Data descriptions

Variable Measure Sign Source

Dependent variable
Load capacity factor Ratio of biocapacity to LCF Global Footprint Network5
ecological footprint
Explanatory variables
Economic growth Gross domestic product per GDP World Bank62
capita (constant US$2015)
Economic policy uncertainty World uncertainty index EPU www.policyuncertainty.com63
Technological innovations Patent applications (residents TIN World Bank62
+ non-residents)
Renewable energy consumption Summation of wind, hydro, RENE BP Statistics64
solar, and nuclear energy
LCF: load capacity factor; GDP: gross domestic product; EPU: economic policy uncertainty; TIN: technological innovation;
RENE: renewable energy consumption.
12 Energy & Environment 0(0)

Table 2. Summary statistics

LCF GDP EPU TIN RENE

Mean 1.061 8.562 −1.512 9.852 0.197

Median 0.538 8.994 −1.361 9.754 0.109
Maximum 3.808 9.629 0.316 14.26 0.620
Minimum 0.230 6.567 −6.354 6.729 0.006
Std. Dev. 1.039 0.841 0.872 1.491 0.192
Skewness 1.718 −0.803 −1.592 0.766 0.762
Kurtosis 4.537 2.334 8.424 4.197 2.039
Jarque-Bera 99.23 21.17 277.0 26.49 22.71
Probability 0.000 0.000 0.000 0.000 0.000
Observations 168 168 168 168 168
Source: Author’s calculation.
LCF: load capacity factor; GDP: gross domestic product; EPU: economic policy uncertainty; TIN: technological innovation;
RENE: renewable energy consumption.

squares method for estimating conditional mean models. It incorporates the measurements of mul-
tiple models for different conditional quantile functions. At its essence, the QR method includes a
specific case known as median regression, which aims to minimize the sum of absolute errors. The
equation (equation (2)) below represents the generalization of quintiles.

Qyi (τ |xi ) = xTiβt (2)

In panel QR with fixed effects, the incidental parameters problem66 emerges, causing inconsistency
as the number of individuals approaches infinity while observations remain fixed. To address this
issue, Koenker67 introduced a methodology that estimates fixed and covariate effects at various
quantiles. This approach alleviates computational challenges by incorporating a penalty term, as
depicted in equation (3).
K


T

N

N
min (α, β) wk Pτk (yit − αi − XitT β (τk )) + λ | αI | (3)
k=1 t=1 i=1 I

In the aforementioned provided equation, the countries (E-7) are denoted by an index (I ), the obser-
vations for economies by T, and the quantiles index by K. The matrix x signifies the explanatory
factors and Pτk represents the quantile loss function. To incorporate the influence of each quantile
on fixed effect measurement, we introduce the weight wk for the kth quantile. In the current study,
we specifically focus on quantiles with the same weights, as suggested by Alexander et al.68
Following the approach of Damette and Delacote,69 we set λ to 1. The quantile function specifica-
tion for the study variables τ can be expressed as follows (equation (4)):

Qyi (τ |αi , εi , xit ) = αi + εt + β1τ GDPit + β2τ GDP2it + β3τ EPUit + β4τ TINit + β5τ RENEit (4)

In equation (4), the index i denotes nations, while the index t represents time. The variable yi repre-
sents the LCF indicator, which acts as the dependent variable and as a proxy for environmental
quality. While GDP and GDP2 are added to evaluate the LCC hypothesis. Other explanatory variables
include EPU as economic policy uncertainty, TIN as technological innovation, and RENE as renew-
able energy consumption. Figure 8 represents the econometric framework of the current study.
Feng et al. 13

Figure 7. Frequency distribution of data.

Results and discussion

This section provides outcomes of econometric methods utilized in this study. These tests include
unit root tests, cointegration tests, panel QR, and fully modified ordinary least squares (FMOLS).
To assess the stationarity among variables of the study, augmented Dickey–Fuller (ADF)70 and
IPS71 tests are used. The findings of both tests are given in Table 2. Outcomes depict that all the
variables are stationary at first difference with 1% significance level. Moreover, both unit root
methods reveal similar results, which confirm the reliability of the findings (Table 3).
Prior to regression analysis, this is crucial to confirm the presence of cointegration in the model.
For this instance, Pedroni,72 Westerlund,73 and Kao74 cointegration techniques are used. Findings
of Westerlund bootstrap cointegration tests are given in Table 4. Statistics of the test are Gt
(−3.081), Ga (−6.617), Pt (−9.271), and Pa (−10.455) with 1% significance level. Entirely all
four statistics confirm that the study model possesses cointegration.
14 Energy & Environment 0(0)

Figure 8. Econometric analysis.

Table 3. Outcomes of ADF and IPS unit root tests.

IPS test ADF test

Indicator
I[0] I[1] I[0] I[1]

LCF 0.644 −7.405∗∗∗ 0.720 −6.620∗∗∗

GDP 2.959 −4.795∗∗∗ 3.041 −4.292∗∗∗
EPU −1.263 −8.313∗∗∗ −1.332 −7.524∗∗∗
TIN 2.410 −3.927∗∗∗ 2.400 −3.707∗∗∗
RENE 3.684 −7.206∗∗∗ 3.291 −6.126∗∗∗
Note: ∗∗∗ significant 1%.
LCF: load capacity factor; GDP: gross domestic product; EPU: economic policy uncertainty; TIN: technological innovation;
RENE: renewable energy consumption; ADF: augmented Dickey–Fuller; IPS: Im-Pesaran-Shin.

Table 4. Westerlund73 bootstrap panel cointegration.

Gt −3.081∗∗∗
Ga −6.617∗∗∗
Pt −9.271∗∗∗
Pa −10.455∗∗∗
∗∗∗
Note: significant at 1% level.

Table 5 shows the outcomes of the Kao74 and Pedroni72 cointegration methods. In the Pedroni
test, four-panel statistics and three group statistics are given. Panel statistics v is −1.204, rho is
0.996, PP is −1.585, and, ADF is −1.96. Whereas ADF and PP statistics are significant while v
and rho are insignificant. In three group statistics, rho is 1.915 (insignificant), PP is −2.785 (signifi-
cant), and ADF is −2.85 (significant). Overall, in the Pedroni test, four out of seven statistics are
significant and confirm the existence of cointegration in the model. ADF t-statistics of the Kao
test is −2.889 which is significant with a 1% significance level and validates the alternate hypoth-
esis for the presence of cointegration.
Feng et al. 15

Table 5. Panel cointegration72

Estimates Stats. Prob.

CO2it = f(GDPit + GDPit2 + EPUit + TINit + RENEit)

Panel v statistics −1.2041 0.885
Panel rho statistics 0.9969 0.840
Panel PP statistics −1.585 0.056∗∗
Panel ADF statistics −1.960 0.025∗∗
Alternative hypothesis: individual AR coefficient
Group rho statistic 1.915 0.972
Group PP statistic −2.785 0.002∗∗∗
Group ADF statistic −2.850 0.002∗∗∗
Kao-cointegration test
ADF t-statistics Prob.
−2.889 0.001∗∗∗
Note: GDP: gross domestic product; EPU: economic policy uncertainty; TIN: technological innovation; RENE: renewable
energy consumption; ADF: augmented Dickey–Fuller; PP: Phillips-Perron.
∗∗ ∗∗∗
, significant at 5% and 1% levels, respectively.

Regression analysis is conducted by applying the PQR method and findings are shown in
Table 6. LCF is a dependent variable that represents environmental quality. Coefficients values
of explanatory factors are presented for four quantiles including 0.20, 0.40, 0.60, and 0.80.
Results show that GDP has an inverse link and GDP2 has a positive effect on LCF. GDP impact
is significant for the initial three quantiles (0.20–0.60) and insignificant for the last quantile. This
depicts that at earlier stages of economic expansion, LCF decreases which indicates reducing envir-
onmental quality. On the other hand, the effect of GDP-square is significant for all four quantiles
(0.20–0.80). This reveals that with an increase in economic growth after a particular threshold, LCF
improves. Entirely this outcome validates the presence of a U-shaped LCC hypothesis in E-7
nations. These findings are matching with some recent studies.2,31,44 Such U-shaped linkage can
occur due to different reasons. According to Karimi et al.,75 when GDP growth is at its lower
stage then economies encourage industrialization by using traditional energy resources which
causes a reduction in EF and environmental quality decreases. In contrast, when GDP growth
attains its threshold level, then nations follow transition towards the environmentally friendly tech-
nologies and renewable energy methods which ultimately improves the LCF.76
The impact of EPU on LCF is negative and significant for three quantiles (0.20–0.60). This
depicts that the rise in EPU leads to the deterioration of the LCF in E-7 countries. A similar
linkage of EPU with environmental quality is found in many other studies.1,2,34 In the presence
of LCF, governments might ignore the adoption of sustainable practices and follow conventional
sources which upsurge the EF and environmental quality reduces.
Regarding technological innovations, the results indicate a negative linkage with LCF, although
the significance may vary across quantiles. Technological advancements can have both favorable
and unfavorable roles for environmental quality. While innovations may lead to more efficient and
eco-friendly technologies, they can also contribute to increased resource consumption and environ-
mental degradation. The negative association suggests that, on balance, the adverse impacts of techno-
logical innovations may outweigh the positive contributions, particularly at higher quantiles.
The effect of RENE on LCF is positive in all four quantiles with a 1% significance level. This
implies that a rise in RENE leads to improved environmental quality by improving overall LCF in
16 Energy & Environment 0(0)

E-7 nations. These findings match with existing literature.44,77,78 Raghutla et al.79 also provide
support for this outcome and explain that usage of renewable energy is comparatively less polluting
and helps to decrease the EF which improves the environmental quality.
Additionally, the FMOLS method is applied to assess the robustness of outcomes captured from
the panel QR method. Results of FMOLS are given in Table 7 which show that all explanatory vari-
ables have a significant linkage with LCF with a 1% significance level in E-7 nations. The findings
of the FMOLS method show that GDP has a negative influence on LCF that a 1% increase in GDP
brings a 3.708% decrease in LCF. However, GDP-squared has a negative effect on LCF with a 0.06
coefficient value. The presence of the LCC hypothesis is confirmed again in FMOLS through the
aforementioned outcomes of GDP and GDP-squared. EPU has a negative impact on LCF that 1%

Table 6. Findings of QR method.

Grid of quantiles

Variables Statistics 0.20 0.40 0.60 0.80

GDPit Coefficient −0.938∗∗∗ −0.706∗∗∗ −0.839∗∗∗ −2.769

Std. Error 0.204 0.185 0.056 2.829
P-value 0.000 0.000 0.000 0.329
GDPit2 Coefficient 0.031∗∗∗ 0.025∗∗∗ 0.022∗∗∗ 0.125∗∗∗
Std. Error 0.002 0.003 0.007 0.023
P-value 0.000 0.000 0.001 0.000
EPUit Coefficient −0.060∗∗∗ −0.058∗∗∗ −0.108∗∗∗ −0.023
Std. Error 0.009 0.020 0.041 0.074
P-value 0.000 0.004 0.009 0.754
TINit Coefficient −0.036∗∗∗ −0.022∗∗∗ −0.013∗∗∗ −0.134∗∗
Std. Error 0.005 0.008 0.016 0.066
P-value 0.000 0.007 0.410 0.045
RENEit Coefficient 1.657∗∗∗ 1.629∗∗∗ 1.844∗∗∗ 4.724∗∗∗
Std. Error 0.048 0.045 0.287 0.800
P-value 0.000 0.000 0.000 0.000
Note: GDP: gross domestic product; EPU: economic policy uncertainty; TIN: technological innovation; RENE: renewable
energy consumption; QR: quantile regression.
∗∗ ∗∗∗
, significant at 5% and 1% levels, respectively.

Table 7. Findings of FMOLS method.

Variables Coefficient St. Error t-statistics P-value

GDPit −3.708∗∗∗ 0.180 −20.507 0.000

GDPit 2
0.0601∗∗∗ 0.002 26.596 0.000
EPUit −0.090∗∗∗ 0.008 −10.139 0.000
TINit −0.068∗∗∗ 0.004 −14.899 0.000
RENEit 3.308∗∗∗ 0.037 87.973 0.000
Source: Author’s estimations.
Note: LCF: load capacity factor; GDP: gross domestic product; EPU: economic policy uncertainty; TIN: technological
innovation; RENE: renewable energy consumption; FMOLS: fully modified ordinary least squares.
∗∗∗
significant at 1% level.
Feng et al. 17

upsurge in EPU leads to a 0.090 decline in LCF. The impact of TIN is negative with 0.068 coef-
ficient value and RENE is found with LCF supportive role. Outcomes depict that a 1% increase in
RENE causes a 3.308% rise in LCF.
Overall, findings of FMOLS or similar to PQR outcomes which confirm the consistency and
robustness of the regression analysis.

Conclusion and policy suggestions

Conclusion
This research provides significant insights into the linkages between economic factors, techno-
logical innovations, and environmental quality, as represented by the LCF, in the E-7 economies.
The robustness of the findings, demonstrated by consistent results in both the panel quantile regres-
sion methods and the FMOLS approach, strengthens the validity and reliability of the conclusions
drawn. The results confirm the existence of the LCC hypothesis by revealing a U-shaped associ-
ation between LCF and GDP. The negative effect of GDP on LCF suggests that in the initial
stages of GDP growth, this leads to a high EF and lower environmental quality. GDP2 on LCF
shows that at higher levels of GDP growth, the linkage reverses, and GDP growth contributes posi-
tively to environmental quality. Furthermore, the findings consistently show that Technological
Innovations and EPU have a negative effect on LCF across all quantiles. These results highlight
the challenges posed by EPU and technological advancements to sustainable development and
environmental quality. The EPU can deter investments in sustainable practices and renewable
energy, while technological innovations can contribute to increased resource utilization and envir-
onmental deterioration. On the other hand, the positive linkage between RENE and LCF under-
scores the importance of transitioning towards cleaner and renewable energy sources. Increasing
the adoption of renewable energy sources can help reduce the EF and enhance environmental
quality. Furthermore, RENE contributes positively to the LCF, indicating that relying more on
renewable energy can lead to a more sustainable and environmentally friendly development path.

Policy suggestions
Effective policy measures are crucial to enhance sustainable development and improve environ-
mental quality in the E-7 economies in alignment with the SDGs, as revealed by the study. To
achieve these goals, policymakers should prioritize the following actions:

• First, governments of E-7 economies should follow measures to mitigate the negative impact of
GDP on LCF. Additionally, sustainable practices should be promoted to improve further the
positive influence of GDP2.
• Second, governments of E-7 nations should enhance policy stability by creating stable and pre-
dictable economic policy environments in line with SDGs 13 and 16. Additionally, sustainable
practices and renewable energy usage should be encouraged through investments, and ultimately
lead to a lower EF and an improved LCF.
• Third, governments in E-7 countries should encourage the utilization of sustainable techno-
logical innovations, in accordance with SDGs 7 and 9, by supporting research and development
efforts in environmentally friendly technologies. Encouraging innovations that minimize con-
ventional resource consumption, reduce pollution, and mitigate environmental impacts will con-
tribute to higher environmental quality.
18 Energy & Environment 0(0)

• Fourth, governments should promote the transition to renewable energy in line with SDG 7,
by implementing policies that incentivize the adoption and deployment of renewable energy
sources. This includes providing financial support, setting renewable energy targets, and
implementing regulatory frameworks. Increasing RENE will reduce the EF and enhance
the LCF.
• Fifth, given the global nature of environmental challenges, fostering international cooperation is
vital, as emphasized by SDG 17. The E-7 economies should engage in collaborative efforts,
knowledge sharing, and partnerships to address common environmental concerns. Sharing
best practices, technological advancements, and experiences will accelerate progress towards
SDGs.

By implementing these policy measures based on the LLC hypothesis and considering the consist-
ency of findings in both panel quantile regression and FMOLS methods, the E-7 economies can
achieve a sustainable balance between GDP growth and environmental quality. This will contribute
to the preservation of natural resources, the reduction of EF, and the overall improvement of the
LCF.

Limitations of the study

While our study contributes valuable insights into the LCC hypothesis and linkage of EPU, TIN,
and RENE on LCF in the context of E-7 countries, several limitations should be acknowledged.
Firstly, the analysis covers the period from 1996 to 2019, and environmental dynamics may
have evolved since then. The study’s findings may not fully capture recent developments or emer-
ging trends in environmental sustainability. Additionally, the use of panel quantile regression, while
addressing issues related to data normality, introduces complexities that warrant careful interpret-
ation. Moreover, the current study covers the panel of E-7 nations. While this selection is useful for
understanding the dynamics within these emerging nations, the findings may not be directly gen-
eralized to other regions or global contexts.

Future perspective of the study

This study has attempted to consider a novel proxy of environmental quality, however, there are
some options to extend this work. Firstly, incorporating more recent data and expanding the study
period could enhance the relevance of our findings. Moreover, a more detailed investigation into
the specific mechanisms through which renewable energy consumption and technological inno-
vations impact LCF would deepen our understanding and inform more targeted policy recom-
mendations. Future research could expand the scope to include a more diverse set of
economies, considering variations in environmental policies, economic structures, and cultural
influences. This expansion would provide a more comprehensive understanding of the linkage
between economic policies, environmental factors, and sustainable development from a global
perspective.

Acknowledgements
The authors acknowledge the participatory contribution of all respondents to this study.

Consent for Publication

Not applicable.
Feng et al. 19

Consent to Participate
Not applicable.

Data availability statement

Available upon request.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publi-
cation of this article.

Funding
The authors disclosed receipt of the following financial support for the research, authorship, and/or publication
of this article: This research has been supported by research grant UBT, Saudi Arabia.

Ethical approval
This article does not contain any studies with human participants or animals performed by any of the authors.

ORCID iDs
Ahsan Anwar https://orcid.org/0000-0002-6732-3280
Qasim Raza Syed https://orcid.org/0000-0002-9328-0907

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Feng et al. 23

Zhenzhen Feng holds a PhD in economics. Her research fields are labor economics, international
economics, development economics, international trade and others.

Dr. Farah Durani is currently an Assistant Professor at the Department of Finance, College of
Business Administration, University of Business and Technology, Jeddah. She obtained her PhD
in International and Monetary Finance at Mewar University, India in 2017. She did her First
Degree in Bachelor of Business Administration, Finance, in 2004 from Kulliyyah of Economics
and Management Sciences, International Islamic University Malaysia. She also obtained her
Master of Science in Finance from International Islamic University Malaysia in 2005. Her areas
of research interests have always revolved around developmental Economics and Finance, initiated
as a quest towards looking for ‘just monetary system’, which now has become a profound interest in
advocating for Sustainable economic systems, sustainable Finance, Energy Economics and Islamic
Finance.

Dr. Ahsan Anwar is currently serving as an Assistant Professor of Economics. He has published
many research articles in World Top-notch Journals of Elsevier, Springer Nature, Taylor and
Francis, Sage, Wiley, Frontiers, MDPI, Inderscience, and Emerald. His area of research interest
is related Sustainable Development Goals, Development Economics, Green Growth, Green
Finance, Energy Economics, Environmental Economics, Sustainable Transport, Sustainable
Development and others.

Dr. Paiman Ahmad is an Assistant Professor at the University of Raparin, Rania-Kurdistan

Region-Iraq. She has research interests in energy economics, sustainable development in develop-
ing economies, climate change, energy transition, SDGs, migration, and the public sector in the
developing world. She holds a PhD in public administration from the National University of
Public Service-Budapest-Hungary-2018.

Qasim Raza Syed is a PhD student in the Centre for Policy Research and International Studies,
Universiti Sains Malaysia, Malaysia. Qasim has been working on energy, environment, finance,
trade, and development economics since 2019. He has published around 40 papers in leading jour-
nals such as Resources Policy, Journal of Cleaner Production, Renewable Energy, Energy, and
Economic Research, among others.

Dr. Ali Abbas holds a PhD in Economics. He obtained his PhD in Economics from National
College of Business Administration and Economics, Lahore, Pakistan in 2023. His area of research
is related to International Trade, Energy and Environmental Economics.