Envi D 22 02920 - R2

Environment, Development and Sustainability
The role of agricultural innovations, renewable energy, and economic growth in the
CO2 emissions of Nepal: An empirical evidence from the environmental Kuznets curve
--Manuscript Draft--
Manuscript Number: ENVI-D-22-02920R2
Full Title: The role of agricultural innovations, renewable energy, and economic growth in the
CO2 emissions of Nepal: An empirical evidence from the environmental Kuznets curve
Article Type: Original paper
Keywords: Agricultural innovations; Canonical cointegration; EKC; Environmental quality; Nepal
Abstract: Using the environmental Kuznets curve framework, this study aimed to quantify the
effects of agricultural innovation, the use of renewable energy, and economic growth
on CO2 emissions for Nepal over the period of 1990-2018. To examine the empirical
findings, the current study used fully modified ordinary least squares and canonical
cointegration estimators to derive the long-run associations between the variables.
Similarly, the study used the Toda–Yamamoto causal test to determine the causal
relationships. The empirical findings disproved the existence of an EKC with an
inverted-U form. Furthermore, agricultural innovations were shown to lead to long-term
improvements in environmental quality. Similarly, the findings indicated that
urbanization and renewable energy significantly lower Nepal's CO2 emissions. The
causal test explored the unilateral linkages from agricultural innovations to CO2
emissions and from renewable energy to CO2 emissions. In contrast, the results
indicated bidirectional causal associations between income and CO2 emissions and
agricultural innovations and CO2 emissions. These results are unique and have
substantial policy implications, which are discussed in the study.
Response to Reviewers: #Response to Reviewer’s Comments
We appreciate the anonymous reviewers for their constructive comments and valuable
time. Which has helped to improve the quality of our manuscript. Each comment has
been carefully considered point by point and responded accordingly. Responses to the
reviewers and changes made in the revised manuscript are highlighted. Please kindly
note that: this is the third round of revision of our manuscript since the initial
submission, the entire manuscript has been revised carefully and major revised parts
are highlighted in yellow color.
Note: To improve language and eliminate typos, and grammatical-related issues we

have taken the author service provided by Springer Nature. Order ID: 3XMSYQM2 , we
also used the Grammarly premium subscription service and final proofread from our
English Native speaker colleague.
Response to Reviewer 5’s comments
General Comment: I have pointed out several points in the body of the manuscripts.
Authors are advised to follow the comments carefully. I hope after full-filling the
comments this corrected version will be able to depict more potential for future readers.
In addition, plagiarism should be reduced.
Finally, in my opinion, major revisions are required.
Response: we feel very much thankful to the reviewer for a very thorough and clear
review of our manuscript. The feedback on the pdf version of our manuscript was truly
helpful and constructive, as a result, our manuscript has drastically improved from the
previous version. We again pay very much thanks to the anonymous reviewer for your
time and expertise, all of the highlighted recommendations have been followed, and
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thoroughly responded. We believe Your constructive suggestions and advice
thoroughly helped to improve our manuscript. The point-by-point changes across the
manuscript are highlighted in yellow for the convenience of the re-review process.
Comment: The paper is well written and it can be accepted for publication
Response: We are very much thankful to the respected reviewer for the
encouragement and recognition of our arduous work on this manuscript.
General Comment: The manuscript presents an insightful investigation into the role of
agricultural innovations, renewable energy, and economic growth in Nepal's CO2
emissions using the Environmental Kuznets Curve (EKC) framework. The revisions
based on the reviewers' comments have significantly improved the manuscript.
However, particular areas could benefit from further refinement.
Response: Thank you for your valuable feedback. We have addressed all the
comments in our revised manuscript to enhance its quality and clarity. For more clarity,
a point-to-point response is given below.
Commet-1. The more comprehensive explanation of the rationale behind the chosen
variables. Clear justifications for including specific variables, their relevance to the
study, and how they align with the theoretical framework would provide a stronger
foundation for the analysis.
Response: Thank you very much for this valid concern, in line with your comment, we
have revised the data and variables section clearly stating the introduction and their
relevance to the model. For more clarity, the revised parts are pasted here for
reference:
Dependent Variable: This study utilized CO2 emissions data downloaded from WDI
(2023) as the dependent variable. Nepal is a least developed economy, however, in
recent years, its developmental activities and extreme dependence on agriculture have
been growing, as a result, which has increased its share of CO2 emissions into the
environment. Nepal is among the top 10 climate change-vulnerable countries with
diverse geo-composition, most of Nepal’s territories cover high hills and the mighty
Himalayan range, and its two-thirds population dependent on agriculture which makes
this study and chosen variables more significant and much-needed study in the context
of Nepal environmental sustainability. In line with these arguments and following the
previous studies of Khan et al. (2020) and many others, including Al-Mulali et al.
(2016) and Shahbaz & Sinha (2019), utilize CO2 emissions as the regressand variable.
Independent Variables: The study of Shahbaz & Sinha (2019) and Al-Mulali et al.
(2016) have discussed the reasons for a nonlinear relationship between economic
growth and CO2 emissions in the environmental Kuznets curve framework while
testing the quadratic role of GDP on CO2 emissions; the standard, inverted U-shaped
EKC, represents this relationship. Considering this phenomenon, the other
determinants of CO2 emissions, including GDP per capita (Y), renewable energy (RE),
agriculture (AG), and urbanization (UP) drawn from WDI (2023) have been utilized to
construct a functional form following the theoretical setup of Liu et al. (2017), and
Ridzuan et al. (2020)
Note: This concern also added as a separate section of a brief discussion in the result
and discussion section of this revised version of the manuscript.
Comment-2. Provide a more detailed rationale for the chosen econometric methods
and model specifications. Could you explain how the selected techniques address
potential endogeneity and other econometric challenges?
Response: Thank you very much for your insightful concern. In line with the proposed
recommendation, the study highlighted the rationale for applying the chosen
econometric approaches. In addition, their effectiveness in accounting for the
possibility of endogeneity has been explained in detail. More clearly, the revised part is
given as;
In 1990, Philips and Hansen introduced the “Fully Modified Ordinary Least Square
(FMOLS)” approach, designed for estimating a single cointegrating relationship using
I(0) data. FMOLS is a method that focuses on kernel estimates to address nuisance
parameters affecting the asymptotic distribution of the OLS estimator. This approach
adjusts the least squares method to accommodate the influence of serial correlation
effects and conducts tests to assess the endogeneity in regressors, which often arise
from the cointegration relationships, to achieve asymptotic efficiency (Kalim &
Shahbaz, 2009). Additionally, FMOLS offers stable and consistent parameter
estimates, particularly in cases with limited sample ranges, as supported by Pedroni
(2001) and Amarawickrama & Hunt (2008).
These notions have been supported by previous studies, by indicating the following
reasons,
The FMOLS approach considering that the properties of our data are first-order
integrated, as well as the small sample size, this paper also used the Pedroni (2000)
FMOLS approach. This approach addresses the bias caused by the endogeneity of the
regressors by incorporating the Phillips and Hansen (1990) semi-parametric correction
into the OLS estimator. In addition, Erdal and Erdal (2020) pointed out that the panel
FMOLS has numerous advantages. It allows serial correlation (SE), existence of
endogeneity (EE), and cross-sectional heterogeneity. Moreover, it will propose both
within dimensions and between dimensions.
Phillips and Hansen, 1990 P.C.B. Phillips, B.E. Hansen Statistical inference in
instrumental variables
regression with I(1) processes Review of Economic Studies, 57 (1990), pp. 99-125,
10.2307/2297545
Ibrahim Muhammad Muye, Ibrahim Yusuf Muye (2017). Testing for causality among
globalization, institution, and financial development: Further evidence from three
economic blocs. Borsa Istanbul Review Volume 17, Issue 2, June 2017, Pages 117-
132. https://doi.org/10.1016/j.bir.2016.10.001
Hilmi Erdal, Gulistan Erdal (2020); Panel FMOLS Model Analysis of the Effects of
Livestock Support Policies on Sustainable Animal Presence in Turkey. Sustainability
2020, 12(8), 3444; https://doi.org/10.3390/su12083444.
Comment-3. Further expand on the policy implications derived from the findings.
Discuss the practical feasibility and challenges associated with implementing the
suggested policies in the context of Nepal.
Response: Done, thank you very much for providing an insightful recommendation. We
have revised and expanded the policy implications out of our findings specifically in the
context of Nepal. We hope this has improved the manuscript significantly. All the
revised parts are highlighted in yellow color.
Commet-4. Consider discussing how Nepal's situation compares to similar studies in

other countries. This can provide insights into the uniqueness of Nepal's environmental
challenges.
Response: Thank you very much for your constructive suggestion, the vitality of
Nepalese agriculture and environmental challenges has been added to the discussion
briefly:
Nepal is among the 10 most vulnerable countries to climate-change-related disasters
and risks, Nepal’s climate vulnerabilities emerge from a combination of fragile
mountainous topography and ecosystems, highly variable monsoon-driven hydrology,
unplanned settlements, and a lack of resilient infrastructure (David Eckstein, 2021). As
it’s approximately 80 percent population is at risk from natural and climate-induced
hazards, particularly those living in poverty, in remote areas, and working in
subsistence agriculture, are at the highest risk, with exposure being spatially
heterogeneous. The continuous global warming caused by the increase in greenhouse
gas emissions has become a serious threat to economic, social, and environmental
sustainability, despite Nepal’s small contributions to global GHG emissions, being
0.06% in 2011, which grew from 0.025% in 1994, Nepal’s GHG emissions from both
energy and non-energy sectors are increasing with growing economic activities, with a
2.5-fold increase from 24 million metric tons in 2000 to 60 million metric tons in 2019,
at an annual average growth rate of 4.8%, it is expected that the pace of economic
development will increase in the country, with increasing consumption of fossil fuels if
the existing trend of energy consumption continues in the long run as observed in other
developed countries (Yamaka et al., 2021). Nepal's agriculture systems are complex,
with insufficient documentation of research evidence on the challenges and
opportunities facing them (Krupnik et al., 2021).
The role of agricultural innovations, renewable energy, and economic growth in the
CO2 emissions of Nepal is crucial in tackling the deteriorating environmental issues
and climate change adverse effects in the Himalayan nation of Nepal. In addition, it
has to overcome many constraints related to the competitiveness, acceptability, and
sustainability of proposed and planned low-carbon initiatives. Further; food insecurity is
likely to be exacerbated by climate change, associated with an increased frequency of
extreme climate events, which is little known and not deeply investigated in Nepal,
meanwhile 25% of Nepal’s population lives in poverty, and over 50% of Nepali
households experience food insecurity, roughly two-thirds of Nepalis are employed in
agriculture, the majority of which is rain-fed, as a result of climate change, by 2030
Nepal is predicted to experience declines in the production of rice, wheat, and cereal
grains, as well as a 5% reduction in real GDP (Randell et al., 2021). The challenges
faced by developing countries in achieving net-zero emissions targets are, however,
very prominent due to their common desire for rapid economic growth, improved socio-
economic conditions, and greater climate resilience (Shakya et al., 2023). A similar
study by Zhang et al., (2022) also suggested that South Asia is a hub for
encompassing air contamination, with 37 of the top tiers of the 40 most contaminated
urban communities around the globe and the empirical findings show that energy
consumption and technological innovations have a significant positive impact on CO2
emanations, which harms biodiversity. However, as a distinct topography and climate
zone Nepal should uniquely underscore the urgency of building resilience to climate
change and recommend policies and investments for integrated climate and
development solutions for green, resilient, and inclusive development for a sustainable
future.
Comment-5. A final proofreading is required to ensure clarity and correctness.
Response: Done, we have taken the author service provided by Springer Nature;
Order ID: 3XMSYQM2 , used the Grammarly premium subscription service, and also
final proofread from our English Native speaker colleague. We believe it has improved
the readability and fluency of the manuscript.
Comment-6. By addressing these points, the paper has the potential to offer a more
robust and comprehensive analysis, contributing significantly to the field of
environmental economics and policy.
Response: We agree that the raised concerns have significantly improved the
manuscript from its previous version. Therefore, we pay thanks to the respected
reviewer for providing adequate recommendations to strengthen the content of this
manuscript. We believe this 3rd round of revision work of our manuscript is up to the
mark for the further process.
Thank you!
Blinded Manuscript(author information must not appear in the Click here to view linked References
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1 The role of agricultural innovations, renewable energy, and economic growth in the CO2
1 2 emissions of Nepal: empirical evidence from the environmental Kuznets curve
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3 3
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7 5 Abstract
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9 6 Using the Environmental Kuznets curve (EKC) framework, this study aimed to quantify the
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11 7 effects of agricultural innovation, the use of renewable energy, and economic growth on CO2
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13 8 emissions in Nepal from 1990-2018. To examine the empirical findings, the current study used
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15 9 fully modified ordinary least squares and canonical cointegration estimators to derive the long-
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17 10 run associations between the variables. Similarly, the study used the Toda–Yamamoto causal
18
19
11 test to determine the causal relationships. The empirical findings disproved the existence of an
20 12 EKC with an inverted U form. Furthermore, agricultural innovations were shown to lead to
21
22 13 long-term improvements in environmental quality. Similarly, the findings indicated that
23
24 14 urbanization and renewable energy significantly lower Nepal's CO2 emissions. The causal test
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26 15 explored the unilateral linkages from agricultural innovations to CO2 emissions and renewable
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28 16 energy to CO2 emissions. In contrast, the results indicated bidirectional causal associations
29
17 between income and CO2 emissions and agricultural innovations and CO2 emissions. These
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31 18 results are unique and have substantial policy implications discussed in the study.
32
33
34 19 Keywords: Agricultural innovations; Canonical cointegration; EKC; Environmental quality;
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36 20 Nepal
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1 1. Introduction
1 2 Sustainable environmental quality is considered an essential part of eminent sustainable
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3 3 economic development; several studies (Khan et al., 2023; Qi et al., 2023) have emphasized
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5 4 reducing CO2 emissions to indicate the improvement of environmental quality. Economic
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7 5 expansion-related activities are closely related to environmental degradation such as
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9 6 greenhouse gas emissions, especially CO2 emissions (CO2E) (Zhang et al., 2019). Such an
10 7 increase causes serious environmental problems; for example, in 2018, climate change and
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12 8 strong global economic performance increased the energy demand to 2.3% and subsequently,
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14 9 the global energy obtained from CO2E by 1.7%, which is equivalent to 33.1 gigatons, up from
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16 10 32.5 gigatons in the previous year (IRENA, 2019).
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18 11 The increased trend of emission of CO2 was considered an incidental threat, and countries
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20 12 worldwide have pledged to reduce their CO2E use while ensuring corrective measures that will
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22 13 hinder its economic development. The environmental Kuznets curve (EKC) assumption has
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24 14 attracted attention from an economic and environmental perspective (Baležentis et al., 2019;
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26 15 Bekhet & Othman, 2018; Pata, 2018b, 2018a). The transfer of attention to EKC hypothesis
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28 16 research explores the link between the environment and economic development (Grossman &
29 17 Krueger, 1991; Madden et al., 2019). The EKC can be used to establish actual consistency
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31 18 between the degradation of the environment and economic development. The EKC points out
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33 19 that economic growth places disruptive pressure on the environment; however, from an
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35 20 economic point of view of development, the damage to the environment caused by economic
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37 21 growth is compensated by an increase in income (Ahmad et al., 2017; Al-Mulali et al., 2015).
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22 According to EKC theory, at the moment when the environment is aggravated by the impact
40 23 of economic activities, economic growth also keeps back the solution for the degradation of
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42 24 the environment.
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45 25 While determining the factors for CO2E is a disconcerting and lacking task, it also has
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26 critical importance in mitigating policies. When a population is environmentally related to the
48 27 lacking contribution of CO2E, the EKC hypothesis qualifies the rigorous modification and
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50 28 exploration of the base for the EKC model through cooperation, then places other possible
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52 29 causations of CO2E into a growth nexus to obtain the best fit. Antecedent studies have shown
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54 30 that the working population, financial development, and Foreign Direct Investment (FDI) are
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56 31 the primary contributing factors of CO2E. However, many studies have attempted to explain
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32 the relationship between economic development and the deterioration of the environment
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1 through the cooperation of CO2E contributors, i.e., urbanization, renewable energy and
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2 2 agriculture, in the context of the EKC hypothesis in solo studies.
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4 3 Agriculture is the main contributor to GHG emissions, which suggests that the EKC still
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6 4 needs to be enhanced (Gokmenoglu & Taspinar, 2018; Mehdi & Slim, 2017; Rafiq et al., 2016).
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8 5 Emissions from agricultural production are calculated to be 11.8% of GHG emissions globally;
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10 6 similarly, almost 50.1% of emissions in Nepal come from agriculture, followed by energy, land
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12 7 use, and industrial processes (Climate Links-USAID, 2019). If no further action is taken, global
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8 agricultural GHG emissions could be raised to 58% in the coming thirty years (World Resource
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15 9 Institute, 2019). This unfavorable trend is anticipated to further intensify issues related to the
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17 10 environment. This shows that the reduction of agricultural emissions, particularly in CO2,
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19 11 should be addressed. This is important because emissions diminution in the agricultural sector,
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21 12 particularly CO2E, is the leading solution to controlling climate change.
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23 13 Agricultural production is highly dependent on climate conditions, including precipitation,
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25 14 temperature, floods, and winds, which affect productivity, commodity prices, and their supply,
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27 15 thus stabilizing or destabilizing economic performance (Holly, 2015). However, while it does
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29 16 produce benefits, the agriculture sector is also a significant emitter (Waheed et al., 2018). It
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31 17 has been reported by US statistics on emission inventories that 8% of GHGs come from
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33 18 agriculture. Similarly, for the production of crops, the boost of fertilizers and pesticides and
34 19 the use of fossil fuel machines in farms also raise the CO2E level (The Carbon Footprint of
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36 20 Crop Protection Products, 2012; Reynolds & Wenzlau, 2012). Some studies have witnessed
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38 21 this phenomenon more closely; for example, Waheed et al., (2018) concluded that the
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40 22 agriculture sector is one of the major contributors of CO2E. The significant modification and
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42 23 green mechanization in agriculture further accelerate CO2E, thereby enhancing threats to the
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44 24 environment (Adebayo et al., 2021).
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46 25 For developing and developed countries, the agriculture sector is also a primary sector;
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48 26 therefore, a reduction in agricultural production leads to unsustainable strategies (Sertoglu &
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50 27 Dogan, 2016). Contradictorily, increased agricultural production requires the use of more
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52 28 energy and higher emissions (D. Zhang et al., 2019). The agriculture sector of Nepal is also
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29 one of the main sectors contributing to the GDP. It contributes 24.26% to the national GDP of
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55 30 Nepal (Statista, 2019), as shown in Fig. 1. Different tools and modern machines are currently
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57 31 used in agriculture, which use renewable energy to operate. Currently, all sectors are pushed
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59 32 to use renewable energy (Qiao et al., 2019). For this reason, the world has noticed an increase
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1 in renewable energy production due to the rise in the need for clean energy (Al-Mulali &
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2 2 Ozturk, 2016). A 4% rise in the contribution of renewable energy sources has elucidated a
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4 3 nearly 25% increase in the demand for global energy (IEA, 2019).
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28 5 Fig. 1. Distribution of GDP across economic sectors from 2009 to 2019 in Nepal. (Source:
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30 6 Statista).
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33 7 The EKC hypothesis shows the relation between CO2E and agriculture and between
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35 8 economic development and urbanization. The EKC hypothesis has gained much interest in the
36 9 field of agriculture (Qiao et al., 2019).
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39 10 There is hardly any previous research on Nepal's agriculture and urbanization. Therefore,
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41 11 the objectives of this study are i) to examine agriculture innovations, economic development,
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43 12 urbanization, and renewable energy in relation to the emission of CO2E, ii) The study use
44 13 multiple cointegration approaches (FMOLS and CCR) to examine agriculture, economic
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46 14 growth, urbanization and renewable energy mutual relations in the case of the EKC hypothesis.
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48 15 FMOLS, canonical cointegration (CCR), and the Toda–Yamamoto causality test are used in
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50 16 this model because it is very appropriate to show the good integration of all the variables. This
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52 17 approach will help to identify the implications of environmental policy and economic policies
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18 in different subsectors of agriculture.
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56 19 There are a few points in this paper, which are treated as the main contributions. 1) This
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58 20 study mainly relies on the existing EKC model, which includes urbanization, renewable energy
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60 21 and agriculture innovations in Nepal. 2) This study uses time-series data to show the
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1 significance of the results to the literature. While every country can provide significant results,
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2 2 perhaps due to the case of different variables that have been previously discussed, the time
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4 3 series data used herein focus on a single country to give us results that can be generalized for
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4 all other countries worldwide. 3) This study also shows that agricultural innovations in Nepal
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7 5 are related to influencing the CO2E level and can help to correctly eliminate CO2E and choose
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9 6 to use a sustainable path and green agriculture in Nepal. By sorting out the impact of CO 2E,
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11 7 this study can specify the causes and actions that can be taken across Nepal's agricultural sector
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13 8 to achieve sustainable development.
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15 9 The remainder of the study: The next section explains the previous literature. Section three
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17 10 highlights the” Data and Models” followed by “Econometric Methods” chosen for the analysis.
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19 11 Section four discusses the findings, followed by the conclusions and limitations of the study.
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22 12 2. Review of past literature
23 13 Rural areas are impacted by climate change in important ways. Because of its impact on
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25 14 ecosystems, climate change has an impact on all elements of human life and food security.
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27 15 People are directly affected by most ecosystems since they have a rural component. Activities
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29 16 in rural areas exacerbate climate change. Indigenous (tribal) peoples account for approximately
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17 5% of the world's population (370 million), occupy approximately 25% of the global area, and
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32 18 account for approximately 15% of the impoverished population (World Bank, 2016). Natural
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34 19 resources are crucial to the survival of these indigenous peoples. Due to their reliance on natural
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36 20 support systems that are vulnerable to climate change (Gautam et al., 2013; Sharma &
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38 21 Chauhan, 2011), tribal peoples comprise one of the populations that are the most vulnerable to
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40 22 climate change and variability (Gautam et al., 2013; Sharma & Chauhan, 2011). Several studies
41 23 have proven the importance of rural populations participating in climate change adaptation
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43 24 efforts explaining that adaptation is a strategy for dealing with changes in socioeconomic and
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45 25 ecological systems as a result of climate change and its consequences. In addition, adaptation
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47 26 is commonly defined as a society's ability to work together and build social capital (Adger,
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49 27 2003). The ability and scale of climate change adaptation are dictated by the sensitivity of
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51 28 humans and natural systems to its effects. Vulnerability is defined as a state of sensitivity to
52 29 injury as a result of exposure to stresses associated with environmental and societal change, as
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54 30 well as a lack of ability to adapt (Gallopín, 2006). Adaptive capability differs by country,
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56 31 community, social group, and individual, as well as over time (Smit & Wandel, 2006). Because
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58 32 poverty is both a condition and a factor of vulnerability, reducing individual and societal
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1 susceptibility to climate change is strongly related to poverty reduction (Tanner & Mitchell,
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2 2 2009).
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4 3 Poverty is commonly characterized as a person's or a family's inability to obtain basic goods
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6 4 and services, with income and consumption being the key determinants (Coudouel, Hentschel,
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8 5 & Wodon, 2002). Poverty is associated with poor health, nutrition, and literacy outcomes, as
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10 6 well as bad social interactions, insecurity, low self-esteem, and helplessness. According to
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12 7 Amartya Sen (1999), people's basic competence enhances their ability to question, confront,
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8 propose, and influence new actions. Poverty also linked to social justice and is defined as the
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15 9 inability of a person to participate due to a lack of resources (Whelan et al., 2006). As a result,
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17 10 a multidimensional view of poverty is gaining traction; such a view considers a broader picture
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19 11 of deprivation, social traits, interconnections, and structural factors (Curwood & Eckerle, 2009;
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21 12 Frye, 2008). Natural resources that are weather-dependent, such as forests, salmon stocks,
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23 13 livestock, and water resources, have previously been managed by resource-dependent
24 14 communities using communal adaptation practices (Adger, 2003; Agrawal, 2001; Suzanne
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26 15 Alexander et al., 2009). Rural community adaptation strategies, on the other hand, are designed
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28 16 to respond to short-term shock events rather than planned initiatives (Ellis, 1999; Nuorteva et
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30 17 al., 2010), are autonomous and reactive rather than strategic (Smit et al., 2000; Wu et al., 2008),
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32 18 are generally used in socioeconomic sectors where capital investment is low (Ellis, 1999;
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34 19 Nuorteva et al., 2010) and are generally used in socioeconomic sectors where capital
35 20 investment is located (Sohngen & Mendelsohn, 1998). Crop diversification, irrigation, water
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37 21 management, disaster risk management, and insurance are all examples of adaptation tactics
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39 22 used in rural areas. The observed and predicted threats are more severe when rural
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41 23 communities' livelihoods are primarily dependent on natural resources.
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43 24 According to growing data, poor individuals in developing countries have a diverse
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45 25 spectrum of adaptation and coping strategies, and local-level study is essential for development
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47 26 policies to be effective (IPCC, 2008). The consequences of climate change on rural livelihoods
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49 27 in the context of poverty in remote places were examined in 1991, by two economists,
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51 28 Grossman and Krueger, who presented the EKC hypothesis, which states that at the early stages
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29 of economic development, environmental emissions rise, while after reaching a certain
54 30 threshold level, further economic development reduces environmental emissions. If income
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56 31 reaches the maximum level, degradation in the environment starts to decrease, which leads to
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58 32 an increase in the quality of the environment (Alam et al., 2016). The emission of CO2 is
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60 33 considered a proxy by which to measure environmental degradation, which can verify the
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1 consistency of the EKC hypothesis (Qiao et al., 2019). Studies related to the EKC show that
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2 2 such results are inconsistent for different countries, for different periods, and with different
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4 3 methodologies.
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6 4 The study of Lacheheb et al. (2015) found no presence of an EKC in Algeria's case. The
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8 5 Johansen cointegration test was used in Azerbaijan, but there was no EKC found (Mikayilov
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10 6 et al., 2018). In both countries, time-series data were utilized, but the study failed to prove the
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12 7 existence of an inverted U-curve to show the environmental deterioration and economic
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8 development of either Algeria or Azerbaijan. Narayan et al. (2016) used panel data for 181
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15 9 countries and obtained heterogeneous results, which validated the aggregation bias (Baek,
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17 10 2015).
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20 11 The EKC hypothesis suggests that different countries have different backgrounds and
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12 characteristics related to the economy and countries’ yields; thus, have different contexts,
23 13 different variables employed in the study, and a different study period employed (Shahbaz &
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25 14 Sinha, 2019). A study by Altıntaş & Kassouri (2020) showed conflicting results in which the
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27 15 EKC for Europe was baseless and single-sided when CO2E was used for environmental
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29 16 degradation, while the EKC in the case of Europe was valid when ecological footprints were
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31 17 utilized. Earlier studies have suggested that development is necessary to achieve economic
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18 growth, which is more sustainable and greener than in previous times (Bekhet & Othman, 2018;
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34 19 Pata, 2018b). Shahbaz et al. (2015) determined the energy growth environment nexus using
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36 20 the Byer-Hanck cointegration approach for India from 1970-2012 and proved the existence of
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38 21 the EKC hypothesis. The EKC results for North Africa and the Middle East show mixed on
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40 22 Gorus & Aslan, (2019) study. Earlier studies have proven that economic growth and the release
41
42 23 of CO2 are positively related to energy utilization (Zhou, 2023). These studies show that the
43 24 use of energy is vital for achieving economic progress despite environmental deterioration
44
45 25 (Hong & Zhang, 2023).
46
47
48 26 When Gokmenoglu & Taspinar (2018) applied the EKC hypothesis to Pakistan's
49
50 27 agriculture from 1971-2014, the presence of the EKC was confirmed. The dual directional
51 28 causalities between GDP, agricultural value, CO2E, energy consumption, and added agriculture
52
53 29 were found to have inelastic positive effects on CO2. Jebli & Youssef (2017) enlarged the
54
55 30 growth environment agriculture energy nexus and integrated trade openness and renewable
56
57 31 energy into Tunisia's agricultural EKC. However, the EKC for Tunisia did not prevail. This
58
59 32 study shows that incorporating renewable energy into agriculture can encourage agricultural
60
61
62
63
64 7
65
1 growth and reduce emissions. Ansari (2022) used ASEAN countries' CO2 data to examine the
1
2 2 EKC and found the approach unsuccessful in providing proof for the ASEAN. This result
3
4 3 conflicted with those of Rafiq et al. (2016), who used agricultural data from 53 countries and
5
4 showed the existence of the EKC. Ridzuan et al. (2020) checked the presence of the EKC
6
7 5 hypothesis for Malaysia and employed data from 1978-2016. By using the Autoregressive
8
9 6 Distributed Lags (ARDL) method, the authors proved the presence of the EKC hypothesis in
10
11 7 agricultural subsectors on the CO2 emissions of Malaysia.
12
13
14 8 In 2017, Sarkodie & Owusu (2017) used data for Ghana from 1971-2012 and found the
15
9 effects of livestock and crop production on CO2 release, and bidirectional causality was
16
17 10 confirmed in a study on CO2E and crops where their found unidirectional causality between
18
19 11 CO2E and livestock however, they did not analyze the EKC hypothesis. Gill et al., (2019)
20
21 12 analyzed the EKC hypothesis for Malaysia using the ARDL method and determined the
22
23 13 presence of an inverted link between CO2 release and renewable energy; the results were
24
25 14 significant. For Malaysia, the authors found that environmental degradation can be cured by
26 15 renewable energy. Similarly, the studies of Abdulqadir (2022) & Abdulqadir (2020) also
27
28 16 supported the use of renewable energy CO2E for OPEC and Sub-Saharan Africa. Bekhet &
29
30 17 Othman (2018) also found similar findings and confirmed this relationship. Saboori et al.
31
32 18 (2016) added urbanization as a regressed variable in the examination of the EKC. This
33
34 19 approach revealed that in the long run, urbanization increases CO2 release. Adebola Solarin et
35
36 20 al. (2017) discovered that the rise in CO2E is due to urbanization. These studies showed
37 21 different findings and a violation of the EKC hypothesis. Rayhan et al. (2018) used the EKC
38
39 22 hypothesis to examine Bangladesh data and added a few other variables as explanatory
40
41 23 variables. Ozatac et al. (2017) used data from 1960 to 2013 and proved that urbanization had a
42
43 24 strong impact on the release of CO2E and that the EKC was present in Turkey; their study also
44
45 25 found solutions for environmental degradation; i.e., in the long run, urbanization increases
46
47
26 CO2E. Al-Mulali & Ozturk (2016) used data for 27 countries, and the results were the same.
48 27 Gasimli et al. (2019) provided evidence of the negative relationship between CO2E and
49
50 28 urbanization in Sri Lanka. These results signify that environmental policies and development
51
52 29 can enable urban area expansion and increase the quality of the environment.
53
54
55 30 In testing the EKC hypothesis, renewable energy and urbanization are considered
56 31 determinants of subsectors of the agricultural EKC. This study will help find the gaps between
57
58 32 urbanization, renewable energy consumption, economic development, CO2E, and agricultural
59
60 33 innovations.
61
62
63
64 8
65
1 3. Data and methods
1
2 3.1.Data
2
3 3 Dependent Variable: This study utilized CO2 emissions downloaded from WDI (2023) as the
4
5 4 dependent variable. Nepal is a rapidly growing economy that has recently increased its share
6 5 of CO2 emissions into the environment. In line with this argument and following the previous
7
8 6 studies of Khan et al. (2020) and many others, including Al-Mulali et al. (2016) and Shahbaz
9
10 7 & Sinha (2019), utilize CO2 emissions as the regressand variable.
11
12
13 8 Independent Variables: The study of Shahbaz & Sinha (2019) and Al-Mulali et al. (2016) have
14
9 discussed the reasons for a nonlinear relationship between economic growth and CO2 emissions
15
16 10 in the environmental Kuznets curve framework while testing the quadratic role of GDP on CO2
17
18 11 emissions; the standard, inverted U-shaped EKC, represents this relationship. Considering this
19
20 12 phenomenon, the other determinants of CO2 emissions, including GDP per capita (Y),
21
22 13 renewable energy (RE), agriculture (AG), and urbanization (UP) drawn from WDI (2023) have
23
24 14 been utilized to construct a functional form following the theoretical setup of Liu et al. (2017),
25 15 and Ridzuan et al. (2020) as;
26
27
28 16 𝐶𝑂2 = f(Y, 𝑌 2 , AG, RE, UP) … … … (1)
29
30
31
17 Where CO2 indicates the CO2 emissions, Y & Y2 denote GDP per capita and its square, RE
32 18 denotes the renewable energy (RE), AG indicates value added in agriculture, and UP shows
33
34 19 urbanization. The thorough definitions and descriptive statistics of the chosen variables are
35
36 20 given in Table 1, while the correlation matrix is shown in Table 2. In contrast, the plot of the
37
38 21 data series based on the logged values is given in Fig. 2.
39
40 22 Table 1. Variables and descriptive statistics
41
42 CO2 Y AG RE UP
Symbols
43
Renewable
44 Agriculture, Urban
energy
45 CO2 emissions GDP per capita forestry, and population
Variable's consumption
46 (metric tons (constant 2010 fishing, value (% of the
definition (% of total final
47 per capita) US$) added (% of total
energy
48 GDP) population)
consumption)
49
50 Mean 0.150 525.796 35.251 89.310 14.521
51 Median 0.123 489.572 34.979 89.517 14.841
52 Maximum 0.334 817.780 48.803 95.120 19.740
53
Std. Dev. 0.077 134.822 5.300 3.084 3.284
54
55 Jarque-Bera 3.484 2.760 1.056 1.156 1.685
56 Probability 0.175 0.252 0.590 0.561 0.431
57
58
23
59 24 Table 2. Cross-correlations between the variables
60
61
62
63
64 9
65
Variables CO2 Y AG RE UP
1 CO2 1
2
3 Y 0.933 1.000
4 AG -0.776 -0.885 1.000
5 RE -0.914 -0.881 0.796 1.000
6
UP 0.865 0.952 -0.946 -0.892 1.000
7
8 1
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29 2
30
31 3 Fig. 2. Graphical presentation of the chosen variables (1990-2018; Source: current study)
32
4
33
34
5 The main objective of the current study is to explore the role of agricultural innovations
35
36 6 and renewable energy consumption on CO2 emissions in Nepal. Theoretically, agricultural
37
38 7 productivity plays a significant role in the economic growth process; for example, the
39
40 8 contribution of agriculture to the GDP remains consistent at 24.26% in Nepal (Statista, 2019),
41
42 9 and most rural residents are directly dependent on this sector for employment. Given that the
43
44 10 contribution of agriculture to GDP is significant, the assumption is that the role of agriculture
45 11 in CO2 emissions may also be substantial since the logic is rational.
46
47
48 12 The reduced form of the functional equation is given as follows:
49
𝐶𝑂2,𝑡 = 𝛽0 + 𝛽1𝑌𝑡 + 𝛽2 𝑌𝑡2 + 𝛽3 𝐴𝐺𝑡 + 𝛽4 𝑅𝐸𝑡 + 𝛽5 𝑈𝑃𝑡 + 𝜇𝑡 … … … (2)
50
51
13
52
53 14 Considering the natural log of the variables, the model is then converted into logarithmic
54
55 15 form for the logical interpretation of the variables, which is as follows:
56
57
58 16 𝑙𝑛𝐶𝑂2,𝑡 = 𝛽0 + 𝛽1 𝑙𝑛𝑌𝑡 + 𝛽2 𝑙𝑛𝑌𝑡2 + 𝛽3 𝑙𝑛𝐴𝐺𝑡 + 𝛽4 𝑙𝑛𝑅𝐸𝑡 + 𝛽5 𝑙𝑛𝑈𝑃𝑡 + 𝜇𝑡 … … … (3)
59
60
61
62
63
64 10
65
1 In Equation 3, 𝛽0 is the slope coefficient, 𝜇𝑡 is the corresponding error term, and 𝛽1 , … . 𝛽5
1
2 2 were the coefficients to be estimated. Similarly, the coefficient (𝛽1 𝑎𝑛𝑑 𝛽2 ) size and nature of
3
4 3 direction explain the nature of the EKC in this study. For example, if 𝛽1 > 𝛽2 = 0, then rising
5
6 4 income increases pollution monotonically, while if 𝛽1 < 𝛽2 = 0 , then a rise in income
7 5 decreases pollution monotonically. If 𝛽1 = 𝛽2 = 0, this indicates no relationship between the
8
9 6 two variables. Similarly, if 𝛽1 > 𝛽2 < 0, this relationship postulates the inverted U-shaped
10
11 7 EKC in the study (Al-Mulali et al., 2016; Khan, Chenggang, et al., 2020; Sapkota & Bastola,
12
13 8 2017); however, if the 𝛽1 < 𝛽2 > 0 relationship exists, this indicates that income initially
14
15 9 raises pollution, and after a certain level, it starts increasing the pollution level in the country,
16
17 10 which states the U-shaped EKC.
18
19 11 3.2.Econometric methodology
20
21
12 The study developed and applied five key steps in the estimation process. (1) This research
22 13 applied unit root tests to analyze the stationarity of the data series. (2) The study applied
23
24 14 cointegration tests to scrutinize the data for possible long-run equilibrium relationships
25
26 15 between the variables; specifically, this research applied the Johansen cointegration test in the
27
28 16 study. (3) The study applied a causality test to determine the causal relationships between the
29
30 17 variables. (4) Finally, to determine the existence of a long-run relationship between the
31
18 dependent and independent variables, the current study intended to apply fully modified OLS
32
33 19 and canonical cointegration regression in the current study. This research used different
34
35 20 software packages (Eviews 10, Stata 16 and MS Excel) to analyze the data.
36
37
38 21 Step 1: Unit root testing is the first step toward empirical data analysis. In the presence of unit
39
22 roots, applying regression directly to the data may produce spurious regression (Granger and
40
41 23 Newbold, 1974; Hossain, 2012), leading to deceptive interpretations (Hossain, 2012). It is
42
43 24 imperative to provide robust results; therefore, augmented Dickey & Fuller (1979) and Phillips
44
45 25 & Perron (1988) tests for the unit roots were employed.
46
47
26 Step 2: The second step addresses the long-run associations among the variables in the data.
48
49 27 As stated by Meuriot (2015), “The advantage of a cointegration relationship is that it enables
50
51 28 estimation of a dynamic relation (nonstationary) using standard methods, adding
52
53 29 decomposition between the intensity of long-term equilibrium (stable) and short-term dynamic
54
55 30 factors (adjustment)”. Before finding the cointegrating and causal relationships, it is necessary
56
57 31 to find the appropriate lag length; results remain misleading due to random lag length selection.
58
32 The VAR lag length system provides various criteria for optimal lag length selection, including
59
60 33 the likelihood ratio (LR), the Akaike information criteria (AIC), Schwarz information criteria
61
62
63
64 11
65
1 (SIC), Hannan and Quinn criteria (HQ), and the final prediction error (FPE) criteria. The most
1
2 2 commonly used standards are the AIC, SIC, and HQ methods. This study uses the AIC as the
3
4 3 lag length criterion due to its active and excellent results compared to the other standards. After
5
4 selecting the lags, the current research moved to the Johansen cointegration test. The benefit
6
7 5 of the Johansen cointegration test is that it uses a vector autoregressive (VAR) system in
8
9 6 nonstationary levels and series differences. Similarly, a number of researchers believe that
10
11 7 compared to the Engle & Granger (1987) and Stock & Watson (2018) tests, Johansen’s test is
12
13 8 an improvement. It prevents problems brought on by errors carried over from one phase to the
14
15 9 next and the problem of selecting a dependent variable. As a result, the test is better suited than
16 10 the Engle-Granger test for multivariate analysis and can identify many cointegrating vectors.
17
18 11 The fact that Johansen's test treats each test variable as an endogenous variable is another
19
20 12 advantageous characteristic (Wassell & Saunders, 2000). Below is the equation commonly
21
22 13 adopted by the Johansen test (Dhungel, 2014):
23
24
14 ∆𝑀𝑡 = 𝜏1 𝑀𝑡−1 … … … … … … … + 𝜏𝑘−1 𝑀𝑡−𝑘+1 + 𝜋𝑀𝑡−𝑘 + 𝜇𝑡 … … (4)
25
26
27 15 In the above equation, µ denotes the Gaussian random error, where π and τ are vectors of
28
29 16 the OLS parameters to be estimated. Here, πMt-k adopts the linear combination of the π matrix,
30
31 17 and Mt variables provide the extended properties (Khan et al., 2018). It is concluded that when
32
33
18 the matrix π rank is equal to or higher than one, it ends with the long-run association; however,
34 19 if it is zero, there will be no relationship between the variables. Engle et al. (1987) and Johansen
35
36 20 (1988) developed two statistics to determine the cointegration relation among the variables.
37
38 21 This study adopted the likelihood ratio to see the number of cointegrating vectors. The null
39
40 22 hypothesis suggests no cointegration exists between one or more cointegrating vectors found
41
42 23 in the data.
43
44 24 Step 3: The third step provides the causality method used in the research. The cointegration
45
46 25 relation offers evidence of a long-run relationship; however, it fails to give the direction for the
47
48 26 causality. Second, cointegration is required to find the long-run elasticities among the
49
50 27 variables. Therefore, in this section, current research uses the Toda–Yamamoto (1995) Granger
51
28 causality test. This method is appropriate when integrating at the same level, at a first-
52
53 29 difference level or a mixture of levels, or first-difference and second-difference variables. Toda
54
55 30 & Yamamoto (1995) used improved Wald test statistics to detect the causality among the
56
57 31 variables; this approach is better than that of the conventional Granger causality test, which
58
59 32 disregards the nonstationary and cointegration elements in the data (Wolde-Rufael, 2005). It
60
61
62
63
64 12
65
1 also ignores the probability of no cointegration or a cointegration vector among the variables
1
2 2 (Amiri & Ventelou, 2012) and uses unit root tests to identify the order of cointegration.
3
4 3 Furthermore, it continues to lag selection such as Dmax through VAR methodology in levels that
5
4 reduce the possibility of the wrong identification of series integration (Wolde-Rufael, 2005).
6
7 5 Once the optimal lags are found, then k+dmax lags of VAR can be obtained, and the Dmax
8
9 6 coefficient of the last lag is ignored (Khan et al., 2018; Wolde-Rufael, 2005; Zapata &
10
11 7 Rambaldi, 1997). Furthermore, it employs the modified Wald statistics to check the direction
12
13 8 of causality (Adriana, 2014). To analyze the bidirectional causality relationships, this test can
14
15 9 be termed as follows:
16
17 𝑘 dmax 𝑘 𝑑𝑚𝑎𝑥
18 10 𝑦𝑡 = 𝛽0 + ∑ 𝛽1𝑖 𝑦𝑡−𝑖 + ∑ 𝛽2𝑗 𝑦𝑡−𝑗 + ∑ 𝛿1𝑗 𝑋𝑡−𝑖 + ∑ 𝛿2𝑗 𝑋𝑡−𝑗 + 𝜀𝑡 … … (5)
19
20 𝑖=1 𝑗=𝑘+1 𝑖=1 𝑗=𝑘+1
21
22 𝑘 𝑑𝑚𝑎𝑥 𝑘 𝑑𝑚𝑎𝑥
23
24
11 𝑋𝑡 = 𝛼0 + ∑ 𝛼1𝑖 𝑋𝑡−𝑖 + ∑ 𝛼2𝑖 𝑋𝑡−𝑖 + ∑ 𝛾1𝑗 𝑦𝑡−𝑗 ∑ 𝛾2𝑗 𝑋𝑡−𝑗 + 𝜇𝑡 … … (6)
25 𝑖=1 𝑗=1 𝑖−1 𝑗=1
26
27 12 where Y and X are dependent and independent variables, respectively, and ɛ and µ denote
28
29 13 the error terms of the models. Chi-squared statistics were used to apply the Wald test (Khan et
30
31 14 al., 2018). The null hypothesis that X does not cause Y and that Y does not cause X can be
32
33 15 written as follows:
34
35 16 Null Hypothesis: δ1j =0 for all the values of i= 1,2,……. K
36
37
38 17 Null Hypothesis 2: ϒ1j =o for all values of i= 1,2,……….. k
39
40 18 From the hypothesis, the rejection of the null hypothesis can result in causality between the
41
42 19 variables.
43
44
45 20 Step 4: This section develops the long-run elasticities of the variables, and we use fully
46
47
21 modified OLS and canonical cointegration regression to explore the long-run elasticities
48 22 among the variables.
49
50
51 23 3.2.1. Fully Modified OLS
52 24 In 1990, Philips and Hansen introduced the “Fully Modified Ordinary Least Square
53
54 25 (FMOLS)” approach, designed for estimating a single cointegrating relationship using I(0)
55
56 26 data. FMOLS is a method that focuses on kernel estimates to address nuisance parameters
57
58 27 affecting the asymptotic distribution of the OLS estimator. This approach adjusts the least
59
60
28 squares method to accommodate the influence of serial correlation effects and conducts tests
61
62
63
64 13
65
1 to assess the endogeneity in regressors, which often arise from the cointegration relationships,
1
2 2 in order to achieve asymptotic efficiency (Kalim & Shahbaz, 2009). Additinally, FMOLS
3
4 3 offers stable and consistent parameter estimates, particularly in cases with limited sample
5
4 ranges, as supported by Pedroni (2001) and Amarawickrama & Hunt (2008).
6
7
8 5 FMOLS is better than the Engel–Granger cointegration test regarding the proper correction
9
10 6 of the interpretation term; thus, the t-statistics are more reliable (Amarawickrama & Hunt,
11
12 7 2008b). The usual FMOLS estimator is given by the following:
13
14 𝑁
15 8 𝛽̂𝐺𝐹𝑀
∗
= 𝑁 −1 ∑ 𝛽̂𝐹𝑀,𝑖
∗
… … … (7)
16
17 𝑗=1
18
19 9 Its associated t-statistic is as follows:
20
21 𝑁
22
23 10 𝑡𝛽̂𝐺𝐹𝑀 = 𝑁 −1/2
∑ 𝑡 𝛽̂𝐹𝑀,𝑖 … … … (8)
24 𝑖=1
25
26
27 11 3.2.2. Canonical cointegration regression
28 12 The “Canonical Cointegration Regression (CCR)” was developed by Park (1992); this test
29
30 13 transforms the data and adopts only the stationary part of the cointegration model (Han, 1996;
31
32 14 Park, 1992). It has the benefit that its transmuted error term is not correlated with the regressors
33 15 in the model, which helps estimate efficient estimators, and parameters remain free from any
34
35 16 problem (Park, 1992). On the other hand, it provides cointegration results that are the same as
36
37 17 those from original models and is helpful in structural breaks and multi-cointegration; its
38
39 18 application is straightforward and requires a one-time data transformation. The detailed process
40
41 19 of CCR is given in Park (1992).
42
43
44 20 4. Results and discussion
45 21 Two different unit root tests have been employed in the study to cross-verify the results of
46
47 22 the unit roots. If the unit roots are present in the data, there may be a chance of obtaining
48
49 23 spurious regression results (Engle et al., 1987). To avoid this problem, this research tested the
50 24 unit roots, and the results are presented in Table 3 and Table 4. Observing from the results in
51
52 25 Table 3 that all the time series have unit roots either at the same level or once differenced, we
53
54 26 can conclude that all the unit-roots have been eliminated in Nepal except for urbanization.
55
56 27 However, urbanization becomes stationary at the second difference; all the other variables are
57
58 28 significantly stationary at the first and second differences. Similarly, because the unit root
59
60 29 provides misleading results of regression analyses (Engle et al., 1987), to carefully avoid the
61
62
63
64 14
65
1 problem, obtained the results using another method, namely, the Phillips–Perron (1988) unit
1
2 2 root test, the results of which are presented in Table 4. Both the unit root results displayed
3
4 3 provide the same outcomes; i.e., the considered variables are not stationary at the same level
5
4 but become stationary at the first difference except urbanization, which is significantly
6
7 5 converted to stationary at a second-difference level.
8
9
10 6 Table 3 - Augmented Dickey-Fuller unit root test
11
12 Variables Level 1st difference
13 Statistics Probability Statistics Probability
14 -0.247 0.921 -9.773 0.000
CO2
15
16 Y 3.994 1.000 -1.110 0.696
17 AG -2.161 0.224 -4.852 0.001
18 RE -1.613 0.462 -2.262 0.025
19
UP -1.471 0.533 -1.905 0.325
20
21 7
22
23 8 Table 4 – Phillip–Perron test
24
25
Variables Level 1st difference
26
27 Statistics Probability Statistics Probability
28 CO2 -0.597 0.856 -9.440 0.000
29 Y 9.319 1.000 -3.313 0.024
30
AG -2.109 0.243 -4.894 0.001
31
32 RE -1.512 0.513 -6.393 0.000
33 UP -1.426 0.555 -1.985 0.291
34 9
35
36
37 10 Appropriate lag length selection is needed before using cointegration and causality tests to
38
39 11 continue with an unsuitable lag length, which gives biased results (Khan et al., 2018). The
40
41 12 study adopted the VAR lag length criteria, which provide five different tests for lag selection,
42 13 including the log-likelihood test (LR), the Akaike information criterion (AIC), the Schwarz
43
44 14 criterion (SIC), the Hannan–Quinn lag length criterion (H-Q) and the final prediction error
45
46 15 method (FPE). The most commonly used tests are the AIC, SIC, and H-Q methods; the AIC
47
48 16 method is chosen to choose the optimal lag length, and the results are given in Table 5.
49
50
17 Table 5 – Optimal lag length.
51
52
53 lo
54 Lag Lo LR AIC SC HQ
55 FPO
56 0 -209.482 NA 10.069 16.499 16.741 16.568
57
58 1 -40.065 260.641 0.000 5.390 6.841* 5.808
59 2 -4.718 40.785* 0.000 4.594 7.255 5.360
60 3 33.885 29.694 6.64e-05* 3.547* 7.418 4.662*
61
62
63
64 15
65
1
1
2
2 The results displayed in Table 5 show that lag 3 for the model seems to be appropriate.
3
4 3 Therefore, for further data analysis, the study opted for the lags based on the AIC criteria for
5
6 4 the model.
7
8
9 5 It is not mandatory to apply cointegration for testing the Toda–Yamamoto causality;
10
11
6 however, it is necessary to use FMOLS and CCR to identify the cointegration relationship
12 7 among the variables. Therefore, the Johansen cointegration test was adopted, and the results
13
14 8 are displayed in Table 6. The empirical results generated from the Johansen cointegration test
15
16 9 provide evidence that the chosen dimension of variables in the current study is cointegrated at
17
18 10 a 5% level by rejecting the null hypothesis of no cointegration. The results provide the
19
20 11 information for two cointegrating equations among the selected variables. The existence of
21
12 cointegration relationships supports the causality among the variables.
22
23
24 13 Table 6 – Johansen cointegration results
25
26 Cointegrating equations Eigenvalues Trace Prob.
27
None * 0.806 105.107 0.000
28
29 At most 1 * 0.725 60.856 0.002
30 At most 2 * 0.367 25.970 0.130
31
32
At most 3 * 0.254 13.603 0.095
33 At most 4 * 0.190 5.684 0.017
34 14 The trace test indicates two cointegrating equations at the 0.05% level.
35 15
36 16 Cointegration is necessary to find a long-term relationship. However, it cannot provide
37
38 17 information about the direction of causality (Dong et al., 2018; Khan et al., 2019). Therefore,
39
40 18 to estimate the causality and its direction, we used the Toda–Yamamoto causality test, and the
41
42 19 results are given in Table 7. Current research used five variables as dependent and tested them
43
44
20 individually for causality. When CO2 is taken as a dependent variable, the results show that
45 21 income, agricultural innovations, and Nepal's renewable energy sector are simultaneously
46
47 22 causing CO2 emissions. However, the causality between income and CO2 emissions was
48
49 23 bidirectional, while the causal linkages between agricultural innovations and renewable energy
50
51 24 were unidirectional. Similarly, significant joint causality was running from all the variables to
52
53 25 CO2 emissions. Again, when taking income as the dependent variable, the findings stated that
54
55
26 CO2 emissions, agricultural innovations, and renewable energy cause income to rise in Nepal.
56 27 The causal relationship between agriculture and renewable energy was unidirectional.
57
58 28 Similarly, all the variables jointly affect the income of Nepal. When agricultural innovations
59
60 29 as the dependent variable, the Toda–Yamamoto causality test extended from renewable energy
61
62
63
64 16
65
1 to agriculture in Nepal, while joint causality was also significant in the case of agricultural
1
2 2 innovations. Likewise, when used renewable energy as a dependent variable, we found that the
3
4 3 only bidirectional causality extended between renewable energy and agricultural innovations.
5
4 In addition, collectively, all the variables also significantly cause CO2 emissions. Finally, it is
6
7 5 observed that agricultural innovations also support a causal linkage to urbanization; similarly,
8
9 6 all the variables also jointly cause urbanization in Nepal. The causal relationship is
10
11 7 demonstrated with the help of the causal loop in Fig. 3, which is easy to understand and able
12
13 8 to explore the causal linkages more logically.
14
15 9 Table 7 Toda and Yamamoto causality test
16
17 Dependent Variables
18 Ind. Variables
19 CO2 Y AG RE UP
20 CO2 -- 6.061** 0.524 0.220 0.285
21 Y 6.255** -- 0.110 0.725 0.001
22
23 AG 4.444** 5.730** -- 7.581** 3.499*
24 RE 7.447** 3.773* 3.226* -- 0.600
25 UP 0.153 0.579 0.309 2.919* --
26 All 13.148** 7.492** 3.875* 9.279** 4.451*
27
10 Stars *,** and ** are used for 10%, 5% and 1% significance
28
29
30 11
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49 12
50
13 Fig. 3 - Causal loop
51
52 14 The long-run elasticity test of selected variables with the CO2 emission model is portrayed
53
54 15 in Table 8. The results show that the linear term of GDP is negative, while the quadratic term
55
56 16 of income is positive. This kind of relationship of income with CO2 emissions in Nepal
57
58 17 postulates a U-shaped EKC. This implies that at the initial level of production and income
59
60 18 growth, pollution tends to decline, and after reaching a certain point in time, with further
61
62
63
64 17
65
1 income growth, the level of environmental emissions increases. This type of relationship is not
1
2 2 surprising and has been previously verified in many studies (Ben Jebli et al., 2015; Ben Jebli
3
4 3 & Ben Youssef, 2015; Omisakin Olusegun, 2009). The role of agricultural innovation in CO2
5
4 emissions is significant and negative, which implies that a unit increase in farming innovations
6
7 5 tends to improve the environmental quality of Nepal by 1.737% in the long run when keeping
8
9 6 other covariates of the model constant. This type of relationship was expected since the import
10
11 7 of more energy-efficient technology in agriculture and cropping techniques that are highly
12
13 8 environmentally friendly tends to improve the environment. Similar relationships have also
14
15 9 been explored by Janifar (2015) and Mehdi & Slim (2017). Mehdi & Slim (2017) provided
16 10 justification for the negative relationship between agriculture value added and CO2 emissions
17
18 11 compared to that found for other sectors, such as manufacturing and industry; the agriculture
19
20 12 sector seemed to have fewer pollutants, similar to findings of Rafiq et al. (2016). The results
21
22 13 obtained from the current study contradict those of Aydoğan & Vardar (2020). According to
23
24 14 the Nepal Energy Sector Synopsis Report (2022), the rate of use of renewable energy in Nepal
25
26 15 has yet to compete with the growing demand for commercial energy types. The promotion of
27 16 “Renewable Energy Technologies (RETs)” is in a very optimistic position and driving the
28
29 17 country toward cleaner energy, Nepal’s overall renewable energy consumption in 2021 equaled
30
31 18 approximately 6.7% of the national total energy consumption, i.e., hydroelectricity: 7468.99
32
33 19 GWh (4.3%); biogas: 2710.26 GWh (1.56%); solar energy: 1322.13 GWh (0.76%); and wind
34
35 20 energy: 0.52 GWh (0.001%). Similarly, our study also suggested that the role of renewable
36
37
21 energy consumption in Nepal is highly environmentally friendly, which reveals that a one-
38 22 percent increase in renewable energy consumption tends to reduce CO2 emissions into the
39
40 23 climate by 11.838% in the long run. The negative relationship between the two variables is
41
42 24 also supported by the previous studies of Bekhet & Othman (2018); Hanif et al. (2019); Khan,
43
44 25 Hussain, et al. (2020); and Zoundi (2017) but contradicts the study of Mehdi & Slim (2017),
45
46 26 who obtained a positive relationship between renewable energy and CO2 emissions. While
47
27 there were no linkages found between renewable energy and CO2 emissions, instead of
48
49 28 demonstrating an increased cost, renewable energy surprisingly shrank the economic growth
50
51 29 (Khoshnevis Yazdi & Shakouri, 2018). The role of the urbanization process in improving long-
52
53 30 term environmental quality is supported by a -3.774 coefficient size. This indicates that a one-
54
55 31 percent increase in urbanization in Nepal tends to improve the environmental quality by -
56
57 32 3.774% in the long run. The study results contradict those of Aslan et al. (2021), Churkina
58
33 (2016), Khoshnevis Yazdi & Dariani (2019), and McGee & York (2018), who found that there
59
60 34 is a significant positive relationship between CO2 emissions and urbanization in Turkey. The
61
62
63
64 18
65
1 role of urbanization is somewhat unique in the current study. This type of relationship is mainly
1
2 2 because the energy sources used in infrastructure development, construction, and other energy-
3
4 3 intensive sectors use renewable energy, which helps curb CO2 emissions.
5
6 4 4.1.1. Discussion of results in the context of Nepal
7
5 Nepal is among the 10 most vulnerable countries to climate-change-related disasters and
8
9 6 risks, Nepal’s climate vulnerabilities emerge from a combination of fragile mountainous
10
11 7 topography and ecosystems, highly variable monsoon-driven hydrology, unplanned
12
13 8 settlements, and a lack of resilient infrastructure (David Eckstein, 2021). As it’s approximately
14
15 9 80 percent population is at risk from natural and climate-induced hazards, particularly those
16
17 10 living in poverty, in remote areas, and working in subsistence agriculture, are at the highest
18 11 risk, with exposure being spatially heterogeneous. The continuous global warming caused by
19
20 12 the increase in greenhouse gas emissions has become a serious threat to economic, social, and
21
22 13 environmental sustainability, despite Nepal’s small contributions to global GHG emissions,
23
24 14 being 0.06% in 2011, which grew from 0.025% in 1994, Nepal’s GHG emissions from both
25
26 15 energy and non-energy sectors are increasing with growing economic activities, with a 2.5-fold
27
28 16 increase from 24 million metric tons in 2000 to 60 million metric tons in 2019, at an annual
29 17 average growth rate of 4.8%, it is expected that the pace of economic development will increase
30
31 18 in the country, with increasing consumption of fossil fuels if the existing trend of energy
32
33 19 consumption continues in the long run as observed in other developed countries (Yamaka et
34
35 20 al., 2021). Nepal's agriculture systems are complex, with insufficient documentation of
36
37 21 research evidence on the challenges and opportunities facing them (Krupnik et al., 2021).
38
39 22 The role of agricultural innovations, renewable energy, and economic growth in the CO 2
40
41 23 emissions of Nepal is crucial in tackling the deteriorating environmental issues and climate
42
43 24 change adverse effects in the Himalayan nation of Nepal. In addition, it has to overcome many
44
45 25 constraints related to the competitiveness, acceptability, and sustainability of proposed and
46
47
26 planned low-carbon initiatives. Further food insecurity is likely to be exacerbated by climate
48 27 change, associated with an increased frequency of extreme climate events, which is little
49
50 28 known and not deeply investigated in Nepal, meanwhile 25% of Nepal’s population lives in
51
52 29 poverty, and over 50% of Nepali households experience food insecurity, roughly two-thirds of
53
54 30 Nepalis are employed in agriculture, the majority of which is rain-fed, as a result of climate
55
56 31 change, by 2030 Nepal is predicted to experience declines in the production of rice, wheat, and
57
58
32 cereal grains, as well as a 5% reduction in real GDP (Randell et al., 2021). The challenges
59 33 faced by developing countries in achieving net-zero emissions targets are, however, very
60
61
62
63
64 19
65
1 prominent due to their common desire for rapid economic growth, improved socio-economic
1
2 2 conditions, and greater climate resilience (Shakya et al., 2023). A similar study by Zhang et
3
4 3 al., (2022) also suggested that South Asia is a hub for encompassing air contamination, with
5
4 37 of the top tiers of the 40 most contaminated urban communities around the globe and the
6
7 5 empirical findings show that energy consumption and technological innovations have a
8
9 6 significant positive impact on CO2 emanations, which harms biodiversity. However, as a
10
11 7 distinct topography and climate zone Nepal should uniquely underscore the urgency of building
12
13 8 resilience to climate change and recommend policies and investments for integrated climate
14
15 9 and development solutions for green, resilient, and inclusive development for a sustainable
16 10 future.
17
18
19 11 Table 8 – Long-run elasticity estimates
20
21 Dependent Variable: LOG (CO2)
22 Method: Fully Modified Least Squares (FMOLS)
23
Variable Coefficient Std. Error t-Statistic Prob.
24
25 LOG(Y) -27.832 10.269 -2.710 0.013
26 LOG(Y2) 190.633 67.373 2.830 0.010
27 LOG(AG) -1.737 0.437 -3.970 0.001
28
29 LOG(RE) -11.838 1.162 -10.184 0.000
30 LOG(UP) -3.294 0.724 -4.550 0.000
31 C -109.173 55.702 -1.960 0.063
32 R-squared 0.933 Mean dependent var -1.980
33
34 Adjusted R-squared 0.918 S.D. dependent var 0.473
35 S.E. of regression 0.136 Sum squared resid 0.406
36 Long-run variance 0.005
37
38
12
39
40 13 Regarding the robustness of the results obtained from the FMOLS estimator, this research
41
42 14 again tested the results of the long-run relationship using the canonical cointegration approach,
43
44 15 and the obtained results are given in Table 9. The results in Table 9 reveal that the results are
45
46
16 similar in sign and magnitude to those of the results from FMOLS. Therefore, it is concluded
47 17 that the estimated results are robust and can be used for long-run policy implications.
48
49
50 18 Table 9 – Robustness of long-run elasticity estimates
51
52 Dependent Variable: LOG (CO2)
53 Method: Canonical Cointegrating Regression (CCR)
54 Variable Coefficient Std. Error t-Statistic Prob.
55
56 LOG(Y) -39.836 11.313 -3.521 0.001
2
57 LOG(Y ) 270.453 74.063 3.651 0.001
58 LOG(AG) -1.657 0.492 -3.368 0.002
59 LOG(RE) -10.955 1.584 -6.912 0.000
60
61
62
63
64 20
65
LOG(UP) -3.774 0.906 -4.164 0.000
1 C -183.257 57.125 -3.207 0.004
2 R-squared 0.9110 Mean dependent var -1.979
3
4 Adjusted R-squared 0.891 S.D. dependent var 0.473
5 S.E. of regression 0.156 Sum squared resid 0.538
6 Long-run variance 0.004
7
8
1
9
2 Several diagnostic tests have been applied to rectify econometric issues from the data, and
10
11 3 the results are displayed in Table 10. This study have tested the model for “Lagrange Multiplier
12
13 4 (LM)” and used White’s heteroscedasticity test to examine the serial correlation and
14
15 5 heteroscedasticity. Furthermore, to analyze the normality of data, this research employed the
16
17 6 Jarque-Bera test; the results showed that the model is free from any econometric problem.
18
19 7 Table 10 - Diagnostic checks
20
21 Diagnostic Tests Statistics Prob.
22
23 Serial Correlation LM 31.199 0.223
24 White Heteroscedasticity 313.000 0.291
25
26 Jarque-Bera 3.78479 0.956
27
28 8 5. Conclusions, limitations and policy implications
29
30 9 Environmental degradation is now considered to be a global threat by ecological
31
10 economists and plays a more critical role, especially in the agriculture sector. Nepal has already
32
33 11 started facing the results of climate change in the shape of natural catastrophes, including heat
34
35 12 strokes, cold waves, and torrential rain-induced flooding, which affect the standing crops and
36
37 13 many farming lands across the country; it is expected that this phenomenon will increase with
38
39 14 the climate change process.
40
41 15 This study focused on the investigation of economic growth, agricultural innovations,
42
43 16 renewable energy, and urbanization on Nepal’s CO2 emissions over the period between 1990
44
45 17 and 2018. To find the possible long-run impact of the chosen variables on the environment,
46
47 18 this research applied heterogeneous econometric approaches. After finding that the variables
48
49 19 have unit roots at the same level and after taking the first difference, the variables were all
50
20 found to be stationary except for urbanization. Therefore, the current study applied the Toda–
51
52 21 Yamamoto causality test to explore the causal dimensions between the variables for the causal
53
54 22 linkages. In addition, the study applied Johansen and Kao cointegration techniques to explore
55
56 23 the equilibrium relationship between the variables. The empirical results obtained from
57
58 24 FMOLS and CCR did not support the existence of an inverted U-shaped EKC; instead, the
59
60 25 empirical results supported the presence of a U-shaped EKC in the current study. Furthermore,
61
62
63
64 21
65
1 agricultural innovations tend to improve environmental quality in the long run. Similarly, the
1
2 2 results also suggested that renewable energy and urbanization substantially reduce CO2
3
4 3 emissions in Nepal. The results of the Toda–Yamamoto causal test explored the unilateral
5
4 linkages from agricultural innovations to CO2 emissions and from renewable energy to CO2
6
7 5 emissions. In contrast, the results indicated bidirectional causal connections between income
8
9 6 and CO2 emissions and between agricultural innovations and CO2 emissions. Furthermore, the
10
11 7 causal linkages from renewable energy to CO2 emissions were also shown to be unidirectional.
12
13 8 Additionally, the results explored that the causal direction from agricultural innovations to
14
15 9 urbanization and CO2 emissions is unilateral. The results estimated from this research are
16 10 unique and have substantial policy implications discussed in the following section.
17
18
19 11 Policy Implications and limitations
20 12 These findings will serve as a guideline for future EKC research; however, generalizing the
21
22 13 results to other countries is not recommended because countries vary in how they produce and
23
24 14 use energy in different sectors. The theoretical and practical implications presented herein can
25
26 15 aid future studies in expanding the EKC hypothesis by varying the use of potential factors such
27
28 16 as trade, technological advancement, and institutional quality to enhance Nepal's
29 17 environmental quality and provide considerable insight into the essence of the EKC.
30
31 18 Since agricultural innovations are the source of improving environmental quality, the
32
33 19 government should motivate and encourage the utilization of renewable energy and cleaner
34
35 20 technology in agriculture by replacing fossil energy-intensive dirty technologies and types of
36
37 21 machinery in agricultural production. The government should provide tax relaxation and
38
39
22 incentives on clean agricultural technology imports and provide farmers credit with which they
40 23 can purchase new and clean technologies for use in agriculture. Similarly, the government
41
42 24 should incentivize and support the adoption of these innovations across the agricultural sector.
43
44 25 This can be achieved through subsidies, training programs, and the provision of resources to
45
46 26 farmers, particularly smallholders, to encourage the transition to more sustainable practices.
47
48 27 Furthermore, policies should prioritize research and development to continually improve these
49
28 innovations, making them more accessible and effective. Additionally, there should be an
50
51 29 increased focus on promoting crop diversification and the use of drought-resistant and climate-
52
53 30 resilient crop varieties to reduce emissions associated with land-use change and mitigate the
54
55 31 impact of climate change. Implementing stricter regulations on land-use practices, such as
56
57 32 deforestation and land degradation, is crucial. Lastly, fostering awareness and education among
58
59 33 farmers, communities, and stakeholders is essential to ensure widespread adoption of these
60
61
62
63
64 22
65
1 innovations and the understanding of their positive impact on emissions reduction. By pursuing
1
2 2 these policy directions, Nepal can harness the potential of agriculture to play a pivotal role in
3
4 3 its commitment to reducing CO2 emissions and achieving a more sustainable and resilient
5
4 future.
6
7
8 5 Additionally, this study has some limitations, as it employed data for the whole country. In
9
10 6 the future, other studies could consider regional or district-wise data and take the areas where
11
12 7 main crops are grown; this approach could be very helpful for adaptation and modern
13
8 mechanization processes. The second limitation is that this study has not incorporated other
14
15 9 agriculture variables, for example, fisheries, poultry, fertilizer use and machinery used at a
16
17 10 disaggregated level to understand these variables better and suggest reliable policies based on
18
19 11 the agricultural innovations in the country. The study adopted time series data ranging from
20
21 12 1990 to 2018; if possible, the data span for similar studies should be expanded to capture
22
23 13 reliable outcomes, hence producing better policy implications in general and for Nepal in
24 14 particular.
25
26
27 15
28
29
30
16 Ethical Approval
31 17 Not Applicable.
32
33 18
34
35
36 19 Consent to Participate
37
38
20 Not Applicable.
39 21
40
41
42 22 Consent to Publish
43
44 23 Not Applicable.
45
46
47 24
48
49 25 Conflict of Interest:
50
51
52 26 The authors declare no conflict of interest.
53
54 27
55
56
57 28 Funding
58
59 29 Not Applicable
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64 23
65
1
1
2
3
2 Availability of data and materials
4
5 3 Relevant data is available from the first author upon request.
6
7 4
8
9
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attachment to manuscript Click here to access/download;attachment to manuscript;5#
Response to the Reviewer Comments.docx
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ENVI-D-22-02920R1
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2 Dear Professor Luc Hens
3 The Editor in Chief, Environment, Development and Sustainability
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7 Editor and Reviewer’s comments ( for 3rd round) and Response
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We are grateful for the opportunity to resubmit our manuscript: ENVI-D-22-02920R1: ‘The
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13 role of agricultural innovations, renewable energy, and economic growth in the CO2
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15 emissions of Nepal: empirical evidence from the environmental Kuznets curve’ in this
16 prestigious journal. We are also thankful to the editorial assistant team for their efforts and time
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put into the review of our manuscript and timely operation, which has helped in improving the
19 quality of this manuscript. Each comment, suggestion, and feedback from the Editor and
20 reviewers have been taken into consideration and responded accordingly in this third version
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22 of revised manuscript.
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24 Note: To improve language and eliminate typos, and grammatical-related issues we have taken the
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26 author service provided by Springer Nature. Order ID: 3XMSYQM2 , we also used the Grammarly
27 premium subscription service and final proofread from our English Native speaker colleague.
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We are looking forward to hearing a positive response from you in this round. Thank you!
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1 Response to Editor and Reviewer’s Comments
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6 We appreciate the anonymous reviewers for their constructive comments and valuable time. Which has
7 helped to improve the quality of our manuscript. Each comment has been carefully considered point by
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9 point and responded accordingly. Responses to the reviewers and changes made in the revised
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11 manuscript are highlighted. Please kindly note that: this is the third round of revision of our manuscript
12 since the initial submission, the entire manuscript has been revised carefully and major revised parts
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14 are highlighted in yellow color.
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20 Note: To improve language and eliminate typos, and grammatical-related issues we have taken the
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22 author service provided by Springer Nature. Order ID: 3XMSYQM2 , we also used the Grammarly
23 premium subscription service and final proofread from our English Native speaker colleague.
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32 Response to Reviewer 5’s comments
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34 General Comment: I have pointed out several points in the body of the manuscripts. Authors are
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advised to follow the comments carefully. I hope after full-filling the comments this corrected version
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37 will be able to depict more potential for future readers. In addition, plagiarism should be reduced.
38 Finally, in my opinion, major revisions are required.
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40 Response: we feel very much thankful to the reviewer for a very thorough and clear review of
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42 our manuscript. The feedback on the pdf version of our manuscript was truly helpful and
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44 constructive, as a result, our manuscript has drastically improved from the previous version.
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46 We again pay very much thanks to the anonymous reviewer for your time and expertise, all of
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the highlighted recommendations have been followed, and thoroughly responded. We believe
49 Your constructive suggestions and advice thoroughly helped to improve our manuscript. The
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51 point-by-point changes across the manuscript are highlighted in yellow for the convenience of
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Comment: The paper is well written and it can be accepted for publication
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2 Response: We are very much thankful to the respected reviewer for the encouragement and
3 recognition of our arduous work on this manuscript.
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General Comment: The manuscript presents an insightful investigation into the role of agricultural
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12 innovations, renewable energy, and economic growth in Nepal's CO2 emissions using the
13 Environmental Kuznets Curve (EKC) framework. The revisions based on the reviewers' comments
14 have significantly improved the manuscript. However, particular areas could benefit from further
15 refinement.
16 Response: Thank you for your valuable feedback. We have addressed all the comments in our revised
17 manuscript to enhance its quality and clarity. For more clarity, a point-to-point response is given
18 below.
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Comment-1. The more comprehensive explanation of the rationale behind the chosen variables. Clear
22 justifications for including specific variables, their relevance to the study, and how they align with the
23 theoretical framework would provide a stronger foundation for the analysis.
24 Response: Thank you very much for this valid concern, in line with your comment, we have revised
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26 the data and variables section clearly stating the introduction and their relevance to the model. For
27 more clarity, the revised parts are pasted here for reference:
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29 Dependent Variable: This study utilized CO2 emissions data downloaded from WDI (2023) as
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31 the dependent variable. Nepal is a least developed economy, however, in recent years, its
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33 developmental activities and extreme dependence on agriculture have been growing, as a result,
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which has increased its share of CO2 emissions into the environment. Nepal is among the top
36 10 climate change-vulnerable countries with diverse geo-composition, most of Nepal’s
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38 territories cover high hills and the mighty Himalayan range, and its two-thirds population
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40 dependent on agriculture which makes this study and chosen variables more significant and
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42 much-needed study in the context of Nepal environmental sustainability. In line with these
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44 arguments and following the previous studies of Khan et al. (2020) and many others, including
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Al-Mulali et al. (2016) and Shahbaz & Sinha (2019), utilize CO2 emissions as the regressand
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47 variable.
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49 Independent Variables: The study of Shahbaz & Sinha (2019) and Al-Mulali et al. (2016) have
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51 discussed the reasons for a nonlinear relationship between economic growth and CO2 emissions
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53 in the environmental Kuznets curve framework while testing the quadratic role of GDP on CO2
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55 emissions; the standard, inverted U-shaped EKC, represents this relationship. Considering this
56 phenomenon, the other determinants of CO2 emissions, including GDP per capita (Y),
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58 renewable energy (RE), agriculture (AG), and urbanization (UP) drawn from WDI (2023) have
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been utilized to construct a functional form following the theoretical setup of Liu et al. (2017),
1
2 and Ridzuan et al. (2020)
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4
Note: This concern also added as a separate section of a brief discussion in the result and discussion
5 section of this revised version of the manuscript.
6
7
8 Comment-2. Provide a more detailed rationale for the chosen econometric methods and model
9 specifications. Could you explain how the selected techniques address potential endogeneity and other
10 econometric challenges?
11 Response: Thank you very much for your insightful concern. In line with the proposed
12
recommendation, the study highlighted the rationale for applying the chosen econometric
13
14 approaches. In addition, their effectiveness in accounting for the possibility of endogeneity has been
15 explained in detail. More clearly, the revised part is given as;
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17 In 1990, Philips and Hansen introduced the “Fully Modified Ordinary Least Square
18
19 (FMOLS)” approach, designed for estimating a single cointegrating relationship using I(0) data.
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21 FMOLS is a method that focuses on kernel estimates to address nuisance parameters affecting
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23
the asymptotic distribution of the OLS estimator. This approach adjusts the least squares
24 method to accommodate the influence of serial correlation effects and conducts tests to assess
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26 the endogeneity in regressors, which often arise from the cointegration relationships, to achieve
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28 asymptotic efficiency (Kalim & Shahbaz, 2009). Additionally, FMOLS offers stable and
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30 consistent parameter estimates, particularly in cases with limited sample ranges, as supported
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32 by Pedroni (2001) and Amarawickrama & Hunt (2008).
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35 These notions have been supported by previous studies, by indicating the following reasons,
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The FMOLS approach considering that the properties of our data are first-order integrated, as well as
39 the small sample size, this paper also used the Pedroni (2000) FMOLS approach. This approach
40 addresses the bias caused by the endogeneity of the regressors by incorporating the Phillips and Hansen
41 (1990) semi-parametric correction into the OLS estimator. In addition, Erdal and Erdal (2020) pointed
42 out that the panel FMOLS has numerous advantages. It allows serial correlation (SE), existence of
43 endogeneity (EE), and cross-sectional heterogeneity. Moreover, it will propose both within dimensions
44 and between dimensions.
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46
Phillips and Hansen, 1990 P.C.B. Phillips, B.E. Hansen Statistical inference in instrumental variables
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48 regression with I(1) processes Review of Economic Studies, 57 (1990), pp. 99-125, 10.2307/2297545
49
50 Ibrahim Muhammad Muye, Ibrahim Yusuf Muye (2017). Testing for causality among globalization,
51 institution, and financial development: Further evidence from three economic blocs. Borsa Istanbul
52 Review Volume 17, Issue 2, June 2017, Pages 117-132. https://doi.org/10.1016/j.bir.2016.10.001
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Hilmi Erdal, Gulistan Erdal (2020); Panel FMOLS Model Analysis of the Effects of Livestock
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56 Support Policies on Sustainable Animal Presence in Turkey. Sustainability 2020, 12(8), 3444;
57 https://doi.org/10.3390/su12083444.
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60 Comment-3. Further expand on the policy implications derived from the findings. Discuss the
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practical feasibility and challenges associated with implementing the suggested policies in the context
1 of Nepal.
2 Response: Done, thank you very much for providing an insightful recommendation. We have revised
3 and expanded the policy implications out of our findings specifically in the context of Nepal. We hope
4 this has improved the manuscript significantly. All the revised parts are highlighted in yellow color.
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6
7 Comment-4. Consider discussing how Nepal's situation compares to similar studies in other
8 countries. This can provide insights into the uniqueness of Nepal's environmental challenges.
9 Response: Thank you very much for your constructive suggestion, the vitality of Nepalese agriculture
10 and environmental challenges has been added to the discussion briefly:
11 Nepal is among the 10 most vulnerable countries to climate-change-related disasters and risks,
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13 Nepal’s climate vulnerabilities emerge from a combination of fragile mountainous topography
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15 and ecosystems, highly variable monsoon-driven hydrology, unplanned settlements, and a lack
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17 of resilient infrastructure (David Eckstein, 2021). As it’s approximately 80 percent population
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is at risk from natural and climate-induced hazards, particularly those living in poverty, in
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20 remote areas, and working in subsistence agriculture, are at the highest risk, with exposure
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22 being spatially heterogeneous. The continuous global warming caused by the increase in
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24 greenhouse gas emissions has become a serious threat to economic, social, and environmental
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26 sustainability, despite Nepal’s small contributions to global GHG emissions, being 0.06% in
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28 2011, which grew from 0.025% in 1994, Nepal’s GHG emissions from both energy and non-
29 energy sectors are increasing with growing economic activities, with a 2.5-fold increase from
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31 24 million metric tons in 2000 to 60 million metric tons in 2019, at an annual average growth
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33 rate of 4.8%, it is expected that the pace of economic development will increase in the country,
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35 with increasing consumption of fossil fuels if the existing trend of energy consumption
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37 continues in the long run as observed in other developed countries (Yamaka et al., 2021).
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Nepal's agriculture systems are complex, with insufficient documentation of research evidence
40 on the challenges and opportunities facing them (Krupnik et al., 2021).
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42 The role of agricultural innovations, renewable energy, and economic growth in the
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44 CO2 emissions of Nepal is crucial in tackling the deteriorating environmental issues and
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46 climate change adverse effects in the Himalayan nation of Nepal. In addition, it has to
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48 overcome many constraints related to the competitiveness, acceptability, and sustainability of
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proposed and planned low-carbon initiatives. Further; food insecurity is likely to be
51 exacerbated by climate change, associated with an increased frequency of extreme climate
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53 events, which is little known and not deeply investigated in Nepal, meanwhile 25% of Nepal’s
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55 population lives in poverty, and over 50% of Nepali households experience food insecurity,
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57 roughly two-thirds of Nepalis are employed in agriculture, the majority of which is rain-fed, as
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59 a result of climate change, by 2030 Nepal is predicted to experience declines in the production
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of rice, wheat, and cereal grains, as well as a 5% reduction in real GDP (Randell et al., 2021).
1
2 The challenges faced by developing countries in achieving net-zero emissions targets are,
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4 however, very prominent due to their common desire for rapid economic growth, improved
5
socio-economic conditions, and greater climate resilience (Shakya et al., 2023). A similar study
6
7 by Zhang et al., (2022) also suggested that South Asia is a hub for encompassing air
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9 contamination, with 37 of the top tiers of the 40 most contaminated urban communities around
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11 the globe and the empirical findings show that energy consumption and technological
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13 innovations have a significant positive impact on CO2 emanations, which harms biodiversity.
14
15 However, as a distinct topography and climate zone Nepal should uniquely underscore the
16 urgency of building resilience to climate change and recommend policies and investments for
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18 integrated climate and development solutions for green, resilient, and inclusive development
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20 for a sustainable future.
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24 Comment-5. A final proofreading is required to ensure clarity and correctness.
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Response: Done, we have taken the author service provided by Springer Nature; Order ID:
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29 3XMSYQM2 , used the Grammarly premium subscription service, and also final proofread from our
30 English Native speaker colleague. We believe it has improved the readability and fluency of the
31 manuscript.
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36 Comment-6. By addressing these points, the paper has the potential to offer a more robust and
37 comprehensive analysis, contributing significantly to the field of environmental economics and
38 policy.
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Response: We agree that the raised concerns have significantly improved the manuscript from its
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41 previous version. Therefore, we pay thanks to the respected reviewer for providing adequate
42 recommendations to strengthen the content of this manuscript. We believe this 3rd round of revision
43 work of our manuscript is up to the mark for the further process.
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45 Thank you!
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Environment, Development and Sustainability

Manuscript Number: ENVI-D-22-02920R2

Article Type: Original paper

Keywords: Agricultural innovations; Canonical cointegration; EKC; Environmental quality; Nepal

Response to Reviewers: #Response to Reviewer’s Comments

Note: To improve language and eliminate typos, and grammatical-related issues we

Response to Reviewer 5’s comments

Response to Reviewer 6’s comments

Response to Reviewer 7’s comments

Commet-4. Consider discussing how Nepal's situation compares to similar studies in

Comment-5. A final proofreading is required to ensure clarity and correctness.

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