Resources Policy 81 (2023) 103352

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Resources Policy
journal homepage: www.elsevier.com/locate/resourpol

Do the Kyoto Protocol, geopolitical risks, human capital and natural

resources affect the sustainability limit? A new environmental approach
based on the LCC hypothesis
Ugur Korkut Pata a, *, Hasan Murat Ertugrul b
a
Faculty of Economics and Administrative Sciences, Department of Economics, Osmaniye Korkut Ata University, 80000, Merkez, Osmaniye, Turkey
b
Faculty of Economics and Administrative Sciences, Department of Economics, Anadolu University, 26470, Eskisehir, Turkey

A R T I C L E I N F O A B S T R A C T

Keywords: India’s declaration at COP26 not to progressively reduce its coal consumption makes the analysis of the envi­
Load capacity factor ronmental quality, i.e., load capacity factor (LCF), important for the country. Therefore, this study aims to
LCC hypothesis investigate the impact of human capital, geopolitical risk, globalization, natural resources, urbanization, and
Kyoto Protocol
income on the LCF in India under the load capacity curve (LCC) hypothesis. To this end, the study applies the
Resources rent
India
novel augmented ARDL approach by considering a dummy variable that includes the effects of the Kyoto Pro­
tocol over the period 1988–2018. The results of the study demonstrate that (i): natural resource rents, human
capital, and globalization support environmental quality improvement, (ii) urbanization has a negative impact
on LCF, and (iii) geopolitical risk has no effect on LCF. In addition, the augmented ARDL estimator shows that
(iv) the LCC hypothesis is valid for India and that (v) the Kyoto Protocol has a negative impact on LCF in the
short-term but no long-term environmental impact. In light of the study’s findings, it is recommended that the
Indian government take advantage of the environmental opportunities presented by globalization, natural
resource rents, human capital development, and income growth, and revise urban planning in an environmen­
tally friendly manner to achieve its environmental sustainability goals.

1. Introduction requiring signatory countries to mitigate polluting emissions. Under the

Environmental pollution and climate change are the most vital
problems that need to be solved urgently. The global economy has
recently experienced many events that raise concerns about climate
change (Adedoyin and Zakari, 2020). The main cause of climate change
is believed to be the increasing consumption of fossil fuels. According to
IPCC projections, average temperatures are at least 1 ◦ C above the
pre-industrial benchmark, and emissions are projected to rise about
1.5 ◦ C above that level between 2030 and 2052 (IPCC et al., 2018).
Given the urgency of the current global situation, many countries and
international initiatives are taking action to halt or at least reduce the
devastating consequences of climate change (Dell et al., 2014).
The Kyoto Protocol,1 also known as COP3, is one of the most sig­
nificant international initiatives to combat environmental degradation,
Protocol, each country is responsible for combating climate change in a
manner consistent with its own capabilities. The contributions of sig­
natory parties are assumed to be progressive, being voluntary and non-
binding (Zafar et al., 2020). Since Kyoto, the United Nations has held
regular conferences on climate change every year. At COP26, held in
Glasgow, United Kingdom, in 2021, countries agreed to improve their
environmental quality. As one of the countries causing the most envi­
ronmental damage, India committed to reduce its CO2 emissions to zero
by 2070. This commitment falls short of the net-zero emissions targets
set at COP26 for 2050. In addition, India opposed the coal phase-out
agreement with China at COP26. India’s insistence at COP26 to
continue to rely on fossil fuels is troubling for the world’s sustainable
future goals. In this context, an examination of the determinants of
ecological quality in India is very important.

* Corresponding author.
E-mail addresses: korkutpata@ktu.edu.tr, korkutpata@osmaniye.edu.tr (U.K. Pata), hmertugrul@anadolu.edu.tr (H.M. Ertugrul).
1
In 1997, 38 countries reached an agreement to keep emission levels at a specific ceiling, but the agreement was not put into practice until 2002. In the first
commitment period, countries promised to reduce emissions by about an average of 5 percent compared to the 1990’s emission levels over the years 2008–2012. In
2012, the second commitment period was established, which was set to be implemented from 2013 to 2020.

https://doi.org/10.1016/j.resourpol.2023.103352
Received 3 October 2022; Received in revised form 27 December 2022; Accepted 29 January 2023
Available online 3 February 2023
0301-4207/© 2023 Elsevier Ltd. All rights reserved.
U.K. Pata and H.M. Ertugrul
Researchers have generally studied environmental factors in India by
analyzing CO2 emissions as a dependent variable. (See, e.g., Danish
et al., 2021; Jayasinghe and Selvanathan, 2021). CO2 only considers air
pollution and neglects water and soil pollution. For this reason, the
ecological footprint variable (EF) is also used as an indicator of pollu­
tion. For example, Pata and Kumar (2021) and Pata et al. (2022) recently
analyzed the carbon footprint and EF for India. However, CO2 and EF
variables do not take both demand and supply side into account
simultaneously. To solve this issue, Siche et al. (2010) offered the LCF
for proxy of environmental quality. LCF is derived by dividing the bio­
capacity over EF and provides a sound indicator of environmental
quality (Pata, 2021a). LCF is measured as “Biocapacity * EF− 1”. The
value below “1′′ indicates that the consumption habits of community are
harming the environment. A value of “1′′ for the LCF analysis denotes the
sustainability limit. An LCF value greater than “1” implies that existing
environmental conditions and natural resources are sufficient to meet
human needs (Fareed et al., 2021). Because the LCF incorporates the
ecological footprint and the biocapacity simultaneously, it provides a
more accurate environmental assessment by examining human demand
for natural resources and the meeting of that demand together (Adebayo
et al., 2022). The LCF is a comprehensive environmental indicator that
shows the anthropogenic pressures on land and water, the resulting air
pollution, and nature’s ability to cope with these pressures. The LCF can
well reflect the Sustainable Development Goals (SDGs), as SDGs 12, 13,
14, and 15 relate to sustainable and responsible human consumption
and restoration of water and land. In this context, the LCF is an impor­
tant tool for environmental analysis.
Researchers have not paid much attention to this comprehensive
environmental quality indicator, which was developed by Siche et al.
(2010) about ten years ago. In the context of ecological economics, Pata
(2021a) conducted a preliminary econometric analysis of the de­
terminants of the LCF. Following this work, few studies have employed
the LCF as a proxy for environmental quality.
The determinants of the LCF have generally been analyzed using
economic growth as one of the explanatory variables (Fareed et al.,
2021; Shang et al., 2022). The basis of the link between income and
environmental quality is based on the Environmental Kuznets Curve
(EKC) proposed by Grossman and Krueger (1991). The EKC hypothesis
states that there is an inverted U-shaped relationship between income
and environmental degradation. On the contrary, there may be a
U-shaped relationship between LCF and income. This is because when
income increases, the production of societies that have no regard for the
environment in the first stage can lead to a decline in ecological quality
and thus LCF. When countries exceed a certain income, economic
growth can increase environmental quality and LCF thanks to cleaner
production technologies and greater environmental awareness. This
Fig. 1. Load capacity factor in India (1988–2018, index).
Source: Global Footprint Network (2022).
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Resources Policy 81 (2023) 103352
U-shaped link between LCF and income can be called the “load capacity
curve” (LCC) hypothesis.
Fig. 1 which includes LCF of India between 1988 and 2018, shows
that the LCF has a decreasing trend over time, with a value of 0.4 in
2018. Values less than 1 indicate the unsustainability of the system.
Considering India’s high population, coal use, and CO2 emissions
together, investigating the determinants of LCF of India stands out as an
important research topic.
This study considers urbanization, globalization, resources rent,
geopolitical risk, and human capital as other determinants of LCF. Ur­
banization can increase food demand, land use, transportation, higher
electricity consumption, and overall energy demand (Shahbaz et al.,
2017). Urbanization also leads to an increase in population in cities with
limited resources and excessive water withdrawal and soil pollution
(Ahmed et al., 2020a). The construction of new areas as well as demo­
lition works, together with high population density, lead to an increase
in waste generation during urbanization (Karak et al., 2012). These ef­
fects of urbanization can reduce the LCF. On the one hand, globalization
can lead to more EF as it expands production (Pata, 2021b). In addition
to that, globalization, with its functions of increasing efficiency,
reducing waste per output, energy efficiency, economic efficiency, and
supporting clean technologies, can lead to improvements in environ­
mental quality (Tisdell, 2001; Balsalobre-Lorente et al., 2020).
The impact of natural resources (NR) on the environment may vary
depending on the level of development of countries (Caglar et al., 2022).
Environmental degradation can increase if a country uses coal and pe­
troleum resources as rents and directs the resulting revenues to increase
household consumption rather than investing in capital and infrastruc­
ture (Jarvis et al., 2011). In contrast, NR such as forests, fisheries,
developed land, and arable land can help minimize anthropogenic
environmental problems (Zafar et al., 2019). The return of NR motivates
people to use them efficiently (Yao et al., 2021a), which can increase the
LCF.
Human capital can positively influence LCF improvement in several
ways. For example, human capital enhancements provide positive dif­
fusions such as increased energy security and adherence to environ­
mental rules (Langnel et al., 2021). Human capital also ensures that
economies are prepared to adopt pollution-free technologies by
increasing worker productivity and energy efficiency (Zafar et al.,
2019). In addition, communities with high income and human capital
may be more willing to use renewable energy sources, consume green
products, and pay carbon taxes (Chankrajang and Muttarak, 2017).
Geopolitical risk can affect the environment in twofold (Anser et al.,
2021): First, geopolitical risk can improve environmental quality
through its mitigating effect by limiting energy consumption and eco­
nomic growth. Second, geopolitical risk can degrade environmental
U.K. Pata and H.M. Ertugrul
quality through its escalating effect by hindering technological devel­
opment and renewable energy use.
Previous literature studies have considered many variables to
analyze the EKC for India (Hossain et al., 2023). Nevertheless, no studies
have explored the impact of geopolitical risk on ecological degradation
and test the validity of the LCC hypothesis for India. This suggests that
there is a significant research gap in assessing Indian environmental
conditions. This study aims to fill the relevant research gap by investi­
gating the LCC hypothesis and providing several contributions to the
literature. First, this is the first work in the literature that considers the
impact of the Kyoto Protocol on LCF, although there are some other
works that focus on India. Second, this paper employs LCF as an envi­
ronmental quality indicator instead of CO2 and EF. Although there is one
study for India that uses LCF (Akadiri et al., 2022), this paper is the first
to analyze the LCC hypothesis by including geopolitical risks and human
capital. Third, this study is the first to apply the Augmented ARDL model
to our knowledge, for India. The traditional ARDL method may provide
incomplete information on cointegration, and the study aims to address
these shortcomings by using the augmented ARDL approach. Accord­
ingly, the work is expected to make a crucial contribution to the liter­
ature in terms of methodology, environmental theories, and research
methodology.
The rest of the paper is organized as follows: Section 2 presents the
literature review. Section 3 explains the theoretical framework, data and
methodology, and Section 4 discusses the empirical results. The final
section provides policy recommendations and conclusions.
2. Literature review
In current research on ecological economics, CO2 emission has been
used widely as environmental degradation indicator. Shahbaz and Sinha
(2019) present a literature survey for CO2 emissions for the EKC hy­
pothesis. Later, EF began to be employed as an environmental degra­
dation indicator (Uddin et al., 2017; Ahmed et al., 2020a; Zakari and
Toplak, 2021). More recently, LCF has been employed for environmental
assessments following the pioneering study of Pata (2021a), but its use is
still limited (see, e.g., Abdulmagid Basheer Agila et al., 2022; Pata and
Samour, 2022; Shang et al., 2022).
A variety of variables is used as determinants of environmental
quality. In some studies, NR rent is employed to make an environmental
assessment. Zafar et al. (2019) and Khan et al. (2021) for the and Khan
et al. (2022) for OECD countries found a negative coefficient for NR rent
on environmental degradation. In contrast, Umar et al. (2020) for China,
Nathaniel et al. (2021) for BRICS countries, Pata et al. (2021) for 10
selected countries, and Shen et al. (2021) for 30 Chinese provinces, and
Tawiah et al. (2021) for 50 African countries, reported a positive coef­
ficient of NR for environmental pollution. In addition, Pata and Isik
(2021) found a negative coefficient for NR rent on LCF for China, while
Akadiri et al. (2022) found a non-significant short-run and a positive
long-run coefficient for NR on LCF for India.
In terms of human capital, Bano et al. (2018) for Pakistan, Yao et al.
(2021b) for China, Ahmed et al. (2020b) for G7 countries, and Pata and
Caglar (2021) for China found a clean impact of human capital on
ecological conditions using CO2 and EF. Moreover, Pata and Isik (2021)
found positive effects of human capital on LCF for China.
Urbanization is another explanatory variable for environmental is­
sues. Shahbaz et al. (2013) for South Africa, Zhang et al. (2015) for
Beijing, Wang et al. (2018) for 170 countries, and Salahuddin et al.
(2019) for Sub-Saharan Africa, found a positive link between urbani­
zation and CO2 emissions. Ahmed et al. (2020a) and Ahmed et al.
(2020b) also reported that urbanization increases EF in G7 countries and
China, respectively. In contrast, Xu et al. (2022) found no effect of ur­
banization on LCF for Brazil.
Globalization and geopolitical risks are also cited as determinants of
environmental degradation. Salahuddin et al. (2019) for Sub-Saharan
Africa countries and Ahmed et al. (2019) for Malaysia revealed a
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Resources Policy 81 (2023) 103352
non-significant impact of globalization on CO2 emissions and EF,
respectively. Shahbaz et al. (2017) for China and Saud et al. (2020) for
49 selected countries reported that globalization reduces pollution. Xu
et al. (2022) found positive effects of globalization on LCF for Brazil.
Regarding geopolitical risks, Husnain et al. (2022) for E7 countries and
Anser et al. (2021) for five emerging countries reported that geopolitical
risks reduce pollution.
The above studies show that human capital generally plays a pro-
environmental role, while urbanization is a triggering factor for pollu­
tion. The role of geopolitical risk on environmental quality is favorable,
but there is no consensus on the influence of globalization and NR rents
on the environment.
Numerous studies address environmental degradation in India. Par­
allel to the current literature, the studies for India primarily use CO2
emissions. Ghosh (2010) found no link with income and CO2 emissions
by employing the ARDL model. Kanjilal and Ghosh (2013) and Ahmad
et al. (2016) showed that GDP and energy increase CO2 emissions.
Tiwari et al. (2013) noted that coal consumption increases CO2 emis­
sions. Boutabba (2014) used an ARDL model and found that financial
development has a positive impact on CO2 emissions. According to
Shahbaz et al. (2015), a positive association is found between global­
ization and CO2 emissions. Pal and Mitra (2017) found the validity of
EKC hypothesis. Sinha and Shahbaz (2018) concluded that both
renewable energy consumption (REC) and trade have negative impact
on CO2 emissions. Usman et al. (2019) argued a negative link with de­
mocracy and CO2. Sahoo et al. (2021) noted that ICT and financial
development reduce environmental degradation. Danish et al. (2021)
and Bandyopadhyay and Rej (2021) reported a negative coefficient for
nuclear energy on CO2 emissions. Nepal et al. (2021) concluded that
there is a negative relationship between FDI, trade, and pollution. Other
studies in the group used the variable EF; Ahmed and Wang (2019)
showed that human capital and urbanization reduce EF. Udemba (2020)
reported a positive (negative) relationship between agriculture (FDI)
and EF. Pata et al. (2022) found that REC and export diversification
decrease EF.
We found only one study in the empirical literature employing LCF
for India. Akadiri et al. (2022) investigate the effect of NR rent and
globalization on the LCF for India. Their results differentiate in the long
and short run. In the short run, they found that globalization and income
are positively linked with LCF, while NR rent is insignificant. In the long
run, income is negatively linked with LCF while globalization and NR
rent are positive. Table 1 summarizes the studies that have conducted an
environmental assessment for India based on empirical analysis.
As shown in Table 1, three studies did not examine the EKC hy­
pothesis, one study invalidated the EKC hypothesis, and all remaining
studies supported the validity of the EKC hypothesis for India. Shahbaz
et al. (2015) and Akadiri et al. (2022) included globalization and NR
rent, and Ahmed and Wang (2019) incorporated human capital and
urbanization in the analysis. Geopolitical risk is not included in the
analysis and the LCC hypothesis for India is not tested. In addition, re­
searchers usually use the conventional ARDL approach. Our work aims
to fill this research gap applying the Augmented ARDL approach for
India and analyzing the impact of geopolitical risk on LCF for the first
time.
3. Research methodology
3.1. Theoretical framework
The study theoretically provides a transition from the roots of the
EKC hypothesis to the LCC hypothesis. The EKC hypothesis, which is
widely known and still being debated by many researchers today, states
that there is an inverted-U-shaped relationship between income and
environmental degradation. Fig. 2 symbolizes the EKC hypothesis.
Over time, many researchers have included energy consumption,
human capital, urbanization, natural resources, geopolitical risk, and
U.K. Pata and H.M. Ertugrul Resources Policy 81 (2023) 103352

Table 1
A summary of present ecological literature for India.
Indicator Author Year Period Approach Results EKC

Carbon dioxide emissions Ghosh 2010 1971–2006 ARDL Model GRW — CO2 (no relationship) NA
Kanjilal and Ghosh 2013 1971–2008 ARDL, Threshold Cointegration (GDP and EC) → CO2 — (+) ✓
Tiwari et al. 2013 1966–2009 ARDL Model (Coal, TO) → CO2 — (+) ✓
Boutabba 2014 1971–2008 ARDL Model (FD, EC, TO) → CO2 — (+) ✓
Shahbaz et al. 2015 1970–2012 ARDL Model (GL, FD, EC) → CO2 — (+) ✓
Ahmad et al. 2016 1971–2014 ARDL Model, EC → CO2 — (+) ✓
Pal and Mitra 2017 1971–2012 ARDL Model (GDP, TO) → CO2 — (+) ✓
Sinha and Shahbaz 2018 1971–2015 ARDL Model (REC, TRD) → CO2 — (-) ✓
Usman et al. 2019 1971–2014 ARDL Model, EC → CO2 — (+) ✓
DEM → CO2 — (-)
Sahoo 2021 1990–2018 ARDL Model EC→ CO2 — (+) ✓
(ICT, FD) → CO2 — (− )
Danish et al. 2021 1971–2018 Dynamic ARDL NE→ CO2 — (-) ✓
POP→ CO2 — (+)
Bandyopadhyay and Rej 2021 1978–2019 ARDL Model, Maki Co-integration (FDI, NE, TO) → CO2 — (-) ✓
Nepal et al. 2021 1978–2016 ARDL Model, VECM (FDI, TRD) → CO2 — (-) ✓
EC → CO2 — (+)

Ecological footprint Ahmed and Wang 2019 1971–2014 ARDL Model (HC, URB)→EF — (-) ✓
EC→EF — (+)
Udemba 2020 1975–2016 NARDL and ARDL Model (AGR, EC, POP)→EF — (+) NA
FDI→EF — (− )
Pata et al. 2022 1965–2014 RALS - Fourier Cointegration (REC, ED) →EF— (-) X

Load capacity factor Akadiri et al. 2022 1970–2017 ARDL Model (GRW and GL)→LCF — (+) in the short run NA
(GL and RES)→LCF — (+) in the long run

Notes: EC: Energy Consumption; GRW: Economic Growth; FD: Financial Development, TO: Trade Openness; GL: Globalization; TR: Trade; DEM: Democracy; NE:
Nuclear Energy Consumption; POP: Population; ED: Export Diversification; RES: Natural Resource Rent.

Urban areas cause excessive resource consumption and expansion of

Fig. 2. The EKC hypothesis.
many other factors as independent variables in testing the EKC hy­
pothesis (for extensive literature, see Sarkodie and Strezov, 2019;
Shahbaz and Sinha, 2019).
As natural resources contribute to high economic growth, they can
theoretically affect environmental quality (Tauseef Hassan et al., 2021).
Natural resource abundance is a prerequisite for sustainable economic
growth. (Meadows et al., 1972). Natural resource extraction can
improve environmental quality by providing energy-efficient technolo­
gies with FDI inputs (Balsalobre-Lorente et al., 2018). In contrast,
excessive and unconscious extraction of natural resources for economic
growth can harm the environment (Wang et al., 2020). Therefore, nat­
ural resources rent can have positive or negative impacts on the
environment.
Geopolitical risks can increase LCF by reducing fossil fuel con­
sumption, but they can also discourage investment in technology and
renewable energy, thereby preventing improvements in environmental
quality (Anser et al., 2021).
economic activities, deforestation and thus unplanned urbanization in­
crease EF (Ahmad et al., 2021). In contrast, urbanization can help
reduce pollution by reducing societies’ energy consumption, increasing
energy efficiency, expanding environmentally friendly transportation
activities, and raising environmental awareness through the theories of
compact city and ecological modernization (Salman et al., 2022).
Human capital can support environmental quality improvement by
enabling people to adapt more easily to the employ of pollution-free and
energy-efficient technologies in industry, households, and transport
(Zafar et al., 2019). Environmentally friendly projects can be more
actively implemented with skilled and trained human capital (Zallé,
2019). Therefore, human capital development is expected to have an
environmentally friendly effect.
The influence of globalization on the environment is controversial.
On the one hand, globalization may have negative impacts on the
ecosystem due to intensive production in the industrial sector, uncon­
scious consumption of natural resources to meet demand at home and
abroad, and pressure on the environment (Shahbaz et al., 2015). On the
other hand, ecological conditions can be improved by reducing the de­
mand for polluting goods (Rudolph and Figge, 2017). The expected ef­
fects of income and other independent variables on LCF are shown in
Fig. 3.
Various researchers have analyzed the influences of all these vari­
ables on environmental degradation under the EKC hypothesis. Differ­
ently, this study analyzes the validity of the LCC hypothesis, which can
be described as an inverse form of the EKC. The LCC hypothesis devel­
oped by Pata and Kartal (2022) and Dogan and Pata (2022) implies that
as income increases, primarily environmental pressure (EF) increases
and nature’s ability (biocapacity) to cope with this pressure decreases.
When income exceeds a certain level, the environmental awareness of
societies increases, and in this context, rising income supports the
reduction of EF and the increase of biocapacity through the consumption
of clean goods and services and the use of environmentally friendly
energy sources.
This U-shaped relationship between income and LCF is called the
LCC hypothesis and is illustrated in Fig. 4. The fact that an increase in
income first reduces LCF can be theoretically represented by the scale

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U.K. Pata and H.M. Ertugrul Resources Policy 81 (2023) 103352

Fig. 3. Environmental influences of the variables according to the theoretical expectations.

3.2. Data, model and methodology

3.2.1. Data and model

This study analyzes the validity of the LCC hypothesis for India, the
country with the second largest population in the world, by integrating
data from 1988 to 2018 into the augmented ARDL model. The validity of
the LCC hypothesis is analyzed using the following model.

LCF = f(GDP,GDPSQ, RES, GPR, URB, HC, KOF) (1)

In Eq. (1), GDP represents gross domestic product, GDPSQ denotes

GDP squared, RES shows NR rent, GPR illustrates geopolitical risk, URB
denotes urbanization, HC symbolizes human capital, and KOF signifies
globalization index. Data are compiled from five different sources. The
units of measure and sources of the variables are listed in Table 2.
Each variable in Table 2 is included in the analysis with logarithmic
transformation to avoid the problem of varying variance and to calculate
elasticities. In Eq. (2), ln represents the logarithm, δ represents the
constant term, γs denote the partial slope coefficients, and ut shows the
′

error term.

ln LCFt = δ + γ 1 ln GDPt + γ 2 ln GDPSQt + γ3 lnRESt + γ4 lnGPRt

+ γ5 lnURBt + γ6 lnHCt + γ7 lnKOFt + ut (2)

Table 2
Fig. 4. Graphical representation of the LCC hypothesis. Description of the variables.
Variable Definition Measurement Source
effect, and then income increases LCF through the composition and
technique effects (Pata et al., 2023). These three effects proposed by LCF Load capacity Biocapacity/ecological footprint Global
factor Footprint
Grossman and Krueger (1991) are also valid for the LCC hypothesis. The Network (2022)
scale effect represents a decrease in environmental quality and LCF with GDP Gross domestic Per capita, constant 2015 USD World Bank
increasing size of economy. Once income exceeds a certain level, it is product (2022)
possible to increase LCF through the development of environmental RES Natural % of GDP World Bank
resources rent (2022)
technologies and awareness via technique and composition effects. On
GPR Geopolitical An index created by compiling Caldara and
the one hand, the EKC is only a hypothesis that reflects environmental risk wars and similar negative Iacoviello
degradation. The LCC, on the other hand, evaluates the environment by geopolitical situations and (2022)
considering both the environmental burden and the extent to which that tensions in newspaper articles
burden can be managed with available resources. If a country reaches a URB Urbanization % of total population World Bank
(2022)
certain level of income, can it increase the LCF and exceed the sustain­ HC Human capital Human capital index based on Feenstra et al.
ability threshold of “1"? To answer this research question and achieve return and duration of education (2015)
the SDGs, testing the validity of the LCC is a necessity. KOF Globalization A cumulative economic, Gygli et al.
political and social index of (2019)
globalization with a value
between 0 and 100

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U.K. Pata and H.M. Ertugrul Resources Policy 81 (2023) 103352

In order for the LCC hypothesis to be valid, γ 1 must be negative, γ 2

∑
a ∑
b
must be positive, and both must be statistically significant. In such a U- ΔlnLCFt = β0 + β1 DUt + β2 ΔlnLCFt− i + β3 ΔlnGDPt− i
shaped relationship, an increase in per capita income after a certain i=1 i=0
inflexion point (GDP*) improves the LCF and thus environmental ∑
c ∑
d ∑
e

quality. The inflexion point is calculated as GDP* = -γ1 /2 γ 2 , and exp + β4 ΔlnGDPSQt− i + β5 ΔlnRESt− i + β6 ΔlnGPRt− i

(GDP*) gives the monetary value. i=0 i=0 i=0

∑
f g
∑ ∑
h
+ β7 ΔlnURBt− i + β8 ΔlnHCt− i +β9 ΔlnKOFt− i + φ1 ln LCFt−
3.2.2. Methodology
1
i=0 i=0 i=0
Researchers should consider several prerequisites when applying + φ2 lnGDPt− 1 + φ3 lnGDPSQt− 1 + φ4 lnRESt− 1 + φ5 GPRt− 1 + φ6 lnURBt− 1
causality or cointegration analyzes. The first of these presuppositions is
+ φ7 lnHCt− 1 + φ8 lnKOFt− 1 + ut
whether or not the series is stationary. In this context, Perron (1989)
criticized the pioneering unit root test of Dickey and Fuller (1979) for (5)
not accounting for structural breaks. Zivot and Andrews (1992) devel­
where Δ denotes first difference, β0 is the intercept, β2 to 9 are the short
oped a unit root test that accounted for an endogenous structural break.
run coefficients, σ1 to 8 are the long term coefficients, and ut represents
Further, Lee and Strazicich (2013) (LS) proposed a test that indicates
the error term. The three test statistics used for the cointegration test and
that the series has a unit root, with the null hypothesis of a structural
their null hypotheses are shown in Eq. (6).
break. The data generation procedure for the one break LS test for a
break is shown in Eq. (3): The null of F − overall → H0 : φ1 = φ2 = φ3 = φ4 = φ5 = φ6 = φ7 = φ8 = 0 ;

(3)
′
Yt = α Kt + et , Xt = δXt− 1 + vt
The null of t − statistic→H0 : φ1 = 0
where Kt includes exogenous variables. The null of unit root can be
tested as H0: δ = 1. In this study, we apply Model C proposed by Lee and The null of F − indep → H0 : φ2 = φ3 = φ4 = φ5 = φ6 = φ7 = φ8 = 0 (6)
Strazicich (2013). The alternative hypothesis of Model C is that statio­ If the three null hypotheses in Eq. (6) are rejected simultaneously,
narity with a break in intercept and in trend, and in this model Kt = [1, t, the presence of a definite cointegration relationship is established. There
Dt, DTt]’, where DTt = t - TB for t ≥ TB + 1, and zero otherwise. The is no cointegration if all three test statistics are meaningless. Further­
structural break date (TB) is determined where the value is found that more, there are two degenerate cases. When the null hypothesis is not
minimizes the LS test statistic. Subsequently, the LS unit root test can be rejected for the “t-statistic” but is rejected for the other two test statis­
expressed as in Eq. (4): tics, degenarete case 1# occurs; when the “F-indep” is not statistically
significant andthe other two test statistics are significant, degenarete
(4)
′
ΔYt = α ΔKt + γ̃
St− 1 + et
case 2# occurs. Degenarete cases also indicate no-cointegration.
where Δ is the difference operator, S ̃t = Y t − φ ̃ ∅
̃ x − Kt ∅, ̃ is the
parameter estimates in the regression of ΔYt , and ΔKt can be defined as 4. Empirical results
[1, ΔDt, ΔDTt]. The unit root null hypothesis of the LS test can be tested
as γ = 0. A prerequisite for the application of the augmented ARDL is that no
The ARDL method is a time series method commonly used by envi­ variable is I(2). Therefore, in the first stage of the analysis, the stochastic
ronmental economists because it offers several advantages in practice. properties of the variables are examined using the LS unit root test, and
The advantages of the ARDL method developed by Pesaran et al. (2001) the results are shown in Table 3.
are the simultaneous estimation of short- and long-term coefficients, I(0) According to the results in Table 3, GPR, URB, and KOF are sta­
and I(1), testing long-term relationships between series with different tionary at level, I(0). In contrast, LCF, GDP, RES, and HC are stationary
degrees of integration, and providing efficient and reliable coefficients at the first difference, I(1). The first commitment period of the Kyoto
for small samples. The cointegration link is analyzed using a bounds test Protocol began in 2008 and ended in 2012, and the study includes this
that separates the lower and upper critical values. period in the analysis by using a dummy variable and applying the
In the traditional ARDL approach, the t-test and F-test are used for augmented ARDL method. The optimal lag lengths for the augmented
cointegration analysis. Researchers generally neglect the t-test applied ARDL method are initially selected using various information criteria
to dependent variables. In addition, the dependent variable in the ARDL and are shown in Table 4.
approach must be I(1). Again, this is often overlooked due to the weak The results in Table 4 show that the ARDL (1, 0, 1, 1, 0, 0, 0, 0) model
properties of unit root tests. Another weakness of the ARDL method is is optimal according to SIC as a result of 4050 separate model runs.
that no cointegration can be derived if the calculated value of the F- Then, the study analyzes the cointegration relationship with three
statistic is midway between the lower and upper critical values. different test statistics and summarizes the findings in Table 5.
McNown et al. (2018) proposed to apply the ARDL method with boot­ The Foverall , tdependent and Findependent statistics are significant at the 5%
strap simulations to address this and similar weaknesses. The re­ level, demonstrating the existence of a cointegration relationship be
searchers also proposed a new cointegration test statistic called F-indep.
According to McNown et al. (2018), the t-, F-overall, and F-indep test Table 3
statistics should be statistically significant simultaneously to demon­ LS unit root test.
strate the presence of cointegration. Sam et al. (2019) presented the I(0) I(1)
appropriate critical values for the F-indep test statistics developed for
Test stat. Break date Test stat. Break date
the bootstrap ARDL test. Sam et al. (2019) also recommended that the
lnLCF 2.869 [0] 1995 − 4.339 [3]* 2005
critical values of the t-statistics for small samples can be derived from −
lnGDP − 1.881 [1] 1996 − 4.969 [0]* 1994
Narayan (2005) and the values of the t-statistics can be obtained from lnRES − 2.575 [3] 1999 − 6.531 [0]* 1997
Pesaran et al. (2001). This approach is called Augmented ARDL lnGPR − 3.640 [0]** 1995 – –
(AARDL) and can be applied using Eq. (5). lnURB − 4.588 [6]* 2002 – –
lnHC − 2.831 [1] 2001 − 3.986 [4]** 1997
lnKOF − 4.248 [2]* 1994 – –

Notes: *** and ** denote statistical significance at 1% and 5%, respectively. [ ]

shows optimal lag lengths.

6
U.K. Pata and H.M. Ertugrul Resources Policy 81 (2023) 103352

Table 4 friendly factor for India in the future is consistent with Sinha and
Model selection summary. Shahbaz (2018), Usman et al. (2019), Sahoo et al. (2021), Danish et al.
Model AIC SIC* HQ Specification (2021), Bandyopadhyay and Rej (2021), and Nepal et al. (2021).
Moreover, a 1% increase in NR rent improves the LCF by 0.049%. In
4050 − 5.201 ¡4.635 − 5.024 (1, 0, 1, 1, 0, 0, 0, 0)
3564 − 5.201 − 4.635 − 5.024 (1, 1, 0, 1, 0, 0, 0, 0) contrast to Pata and Isik (2021), these results are consistent with those of
3555 − 5.225 − 4.612 ¡5.033 (1, 1, 0, 1, 0, 1, 0, 0) Zafar et al. (2019), Danish et al. (2020), and Yao et al. (2021a).
3636 − 5.177 − 4.611 − 4.999 (1, 1, 0, 0, 0, 1, 0, 0) Geopolitical risk does not affect the LCF. This result is in contrast to
4041 − 5.211 − 4.598 − 5.019 (1, 0, 1, 1, 0, 1, 0, 0) Riti et al. (2022), Anser et al. (2021), Husnain et al. (2022), and Jiao
4293 − 5.114 − 4.595 − 4.952 (1, 0, 0, 1, 0, 0, 0, 0)
3608 ¡5.251 − 4.591 − 5.044 (1, 1, 0, 0, 1, 1, 0, 1)
et al. (2022), who reported that increasing geopolitical risk has a
3969 − 5.201 − 4.588 − 5.009 (1, 0, 1, 2, 0, 0, 0, 0) favorable role in improving environmental quality.
Urbanization leads to tremendous environmental degradation, as a
1% increase in urbanization reduces the LCF by 2.5%. Contrary to Xu
tween the LCF and its possible determinants. The diagnostic tests in the et al. (2022) our findings related to urbanization are in line with those of
lower part of Table 5 show that the error terms of the augmented ARDL Shahbaz et al. (2013), Zhang et al. (2015), Wang et al. (2018), Sala­
(1, 0, 0, 1, 0, 0, 0, 0) model do not exhibit the problems of autocorre­ huddin et al. (2019), and Ahmed et al. (2020a,b).
lation, heteroscedasticity, and non-normal distribution. The Ramsey Human capital is an important socioeconomic element that supports
reset test also proves that the model is set up in the correct form. the environment. A 1% increase in HC increases LCF by 1.47%. This
Moreover, the CUSUM and CUSUMSQ outcomes in Fig. 5 confirm that finding is in line with Bano et al. (2018), Yao et al. (2021b), Ahmed et al.
the coefficients are stable over time. (2020b), and Pata and Isik (2021). Better-educated people can adopt
After determining the cointegration and proving that the augmented cleaner production and consumption habits. In addition, higher levels of
ARDL model satisfies several assumptions, the study estimates simulta­ education can provide people with higher incomes and enable them to
neously the long- and short-term coefficients in the final stage. Ac­ consume cleaner and greener goods. It is possible that India will develop
cording to the results in Table 6, GDP is negative and GDPSQ is positive, LCF by taking advantage of these environmental benefits of human
and both coefficients are statistically significant at 1%. This means that capital.
the LCC hypothesis is valid. The validity of the LCC hypothesis shows Finally, globalization increases LCF. Globalization enables the
that once India’s per capita income exceeds a certain level, LCF increases spread of green and clean technologies among countries and allows
and so does environmental quality. Societies with increasing incomes developing countries like India to import high-tech products into the
demand cleaner marine and aquatic environments, better air quality, world market. Thanks to the environmental technologies that global­
and green land spaces. Therefore, an increase in income may reduce EF ization has made progress, an increase in LCF can be achieved in India.
in the future and increase biocapacity through environmental invest­ However, the Kyoto Protocol does not have a positive effect on the LCF;
ment. The view that economic growth will become an environmentally in fact, it has a negative effect in the short term. It is possible that the

Table 5
Augmented ARDL analysis.
Dependent variable Dummy Lag length Test stat. Cointegration

LCF DummyKYO 1,0,1,1,0,0,0,0 Foverall : 5.273 ∗ ∗ tdependent : − 5.173** Verified.

Findependent : 5.040**

Critical values 1% 5% 10% k=7

Statistics I(0) I(1) I(0) I(1) I(0) I(1) Reference

Foverall 4.10 6.15 2.87 4.44 2.38 3.72

Narayan (2005)
tdependent − 3.43 − 5.19 − 2.86 − 4.57 − 2.57 − 4.23
Pesaran et al. (2001)
Findependent 3.62 6.12 2.47 4.30 2.02 3.55
Sam et al. (2019)

Diagnostic Check

Tests F-statistics p-value Tests F-statistics p-value

White 1.651 0.166 BPG 1.432 0.240

LM 0.445 0.648 ARCH 2.770 0.107
JB 0.387 0.823 Glejser 1.865 0.115
Ramsey 1.862 0.190

Note: See notes for Table 3.

Fig. 5. CUSUM and CUSUMSQ results.

7
U.K. Pata and H.M. Ertugrul Resources Policy 81 (2023) 103352

Table 6 • Resources rent contributes to the increase in LCF. For this reason, the
Long and short-run coefficients. Indian government should prevent overuse of resources through
Variable coefficient Std. error. t-stat p-value educational programs that raise citizens’ awareness and minimize
the risk of resource depletion. Resources rent should be transformed
Long-run
lnGDP − 7.225* 1.815 − 3.980 0.000 into a greener structure with green extraction activities. Indian pol­
lnGDPSQ 0.493* 0.128 3.844 0.001 icymakers should use a portion of the revenue from resources rent to
lnRES 0.049** 0.023 2.119 0.048 import technologies that enable more environmentally friendly
lnGPR − 0.010 0.010 − 0.970 0.344 extraction of natural resources. In addition, India should enact laws
lnURB − 2.595* 1.062 − 2.442 0.025
lnHC 1.479* 0.538 2.749 0.013
to protect energy and water sources, prevent deforestation, and
lnKOF 0.385* 0.135 2.834 0.011 promote energy-efficient technologies in mining. Indian decision
DummyKYO − 0.009 0.014 − 0.667 0.512 makers should also integrate environmentally friendly technologies
Constant 31.723* 7.929 4.000 0.000 into natural resource consumption and rent to create a sustainable
Inflection point (GDP*) 1499.528 $
resource system. In this way, it is possible to support LCF develop­
Short run ment by protecting NR and paying for resources that are more
lnΔGDP − 6.487* 1.380 − 4.697 0.000 effective.
lnΔGDPSQ 0.486* 0.100 4.839 0.000
lnΔRES 0.079* 0.010 7.465 0.000
• Urbanization has a detrimental effect on the LCF. India’s high pop­
lnΔGPR − 0.007 0.006 − 1.191 0.249 ulation and settlement density leads to rapid depletion of NR in
lnΔURB − 1.564 1.024 − 1.527 0.144 urban areas and pollution of water and land. Therefore, opportu­
lnΔHC 0.928*** 0.504 1.841 0.082 nities for the poor living in India’s urban areas and those who rely on
lnΔKOF 0.455* 0.128 3.554 0.002
infrastructure services should be improved. The Indian government
ΔDummyKYO − 0.028** 0.009 − 2.872 0.010
ECTt-1 − 0.995* 0.137 − 7.252 0.000 should take steps to prevent the growth of transport-related emis­
Constant 32.703** 4.571 7.153 0.000 sions in urban areas. The use of non-motorized vehicles and public
transportation should be encouraged to improve environmental
Note: See the notes for Table 3.
quality. In addition, Indian society should help reduce pollution in
urban areas by relying on environmentally friendly technologies and
cost disadvantage that the Kyoto Protocol imposes on countries has
energy-efficient hybrid and electric vehicles. The development of
played a role against environmental quality.
LCF should be ensured through a long-term, environment-oriented
urban planning program. Urban planners should prepare an infor­
5. Conclusion and policy recommendation
mative and guiding urbanization program for households to use NR
more consciously and environmentally friendly. In addition, urban
This study examined the impact of geopolitical risk, NR, urbaniza­
planners should strictly monitor waste disposal, recycling and water
tion, human capital, globalization, and income on the LCF in India using
conservation in urban areas. Green housing can also be used as
the augmented ARDL method. It also tested the validity of the LCC hy­
another policy element to decline the ecological damage.
pothesis by considering the impact of the Kyoto Protocol. The estimated
• Human capital is an important element that supports environmental
contemporaneous coefficients indicate that the Kyoto Protocol has a
quality. The positive aspect of human capital shows that education is
negative impact on the LCF in the short run and that geopolitical risks
an important factor for environmental sustainability. Human capital
have no impact on environmental quality. In contrast, globalization, NR
development is important for Indian environmental policy because
rent, and human capital support the improvement of environmental
the increase of EF and decrease of biocapacity are directly related to
quality, and the LCC hypothesis is valid for India. In light of these
human activities. The Indian government should encourage the
findings, the study offers consequential policy suggestions.
establishment of environmental education programs in the schools
and universities. Environmental awareness programs should be used
• The validity of the LCC hypothesis for India implies that income
to reduce the excessive use of resources in society’s living and
growth could improve environmental quality over time. India is
working habits and to promote the use of environmentally friendly
expected to experience the fastest growth in the world between 2021
energy resources. At the same time, policymakers should support
and 2025, averaging 7.2% (Focus Economics, 2021). Transforming
individuals and institutions that provide renewable resource
India into a net-zero economy could generate 50 million additional
awareness training as part of individuals’ understanding of the social
jobs and $1 trillion in benefits by 2030 and $15 trillion in benefits by
benefits of using renewable energy.
2070 (World Economic Forum, 2021). India stated at COP26 that it
• Globalization is an eco-friendly factor for India. Globalization plays a
will reach its net zero targets by 2070. Over the next 50 years, India
role in spreading environmental awareness in countries. In addition,
should direct its economic expansion toward investments that
the increase in income in countries due to globalization leads to an
contribute to environmental protection. Rising income levels should
increase in the environmental demand of individuals who have
be shifted to investments in renewable energy and the development
achieved a high standard of living. In the process of globalization,
of carbon capture technologies. To eliminate water pollution, fishing
India should integrate the clean technologies imported from abroad
activities should be organized, industrial waste discharged into wa­
more into the production process. The Indian government should
terways should be cleaned of pollutants using high technology, and
ensure that domestic companies adopt the energy efficiency tech­
new trees should be planted to combat land degradation. With the
niques that have emerged because of globalization. International
opportunities provided by economic progress, the Indian govern­
environmental institutions, organizations, and agreements that are
ment should also provide financial support to private foundations
part of the globalization process are also expected to play a role in
and organizations engaged in environmental awareness programs.
improving environmental quality. Maamoun (2019) noted that the
Thus, the income gains resulting from economic expansion can
Kyoto Protocol reduced CO2 emissions by 7%, and Aichele and Fel­
contribute to the development of the LCF.
bermayr (2013) by 10%. Although some researchers claim that
• Geopolitical risk has no impact on LCF. In the last 10 years, India has
Kyoto has been successful in reducing CO2 emissions, this agreement
faced some geopolitical risks such as visa restrictions and terrorist
contains little on soil and water pollution. Therefore, as Rosen (2015)
attacks in Mumbai (Tiwari et al., 2019). These have economic im­
noted, the economic costs of the Kyoto Protocol could lead to a
pacts, but since they do not directly affect LCF, Indian environmental
short-term decline in the LCF in India.
policy makers should not take action against geopolitical risks.

8
U.K. Pata and H.M. Ertugrul
• One of the limitations of this study is that it focused only on India.
Future studies can analyze variables such as geopolitical risk and
human capital on LCF for different groups of countries using panel
data analysis. Another limitation is that the study only considers the
Kyoto Protocol as a structural change. However, important events
such as the Indian economic crisis of 1991 and the Kargil War of
1999 may have an impact on the LCF in India, and it is therefore
recommended that these structural changes be included in the
analysis in future studies.
Funding
None, not applicable.
Ethical approval
This article does not contain any studies with human participants
performed by any of the authors.
Consent for publication
Our study does not contain individual person’s data.
Consent to participate
No human or animal subjects were used in our study, and no ques­
tionnaire was conducted.
Authors’ contributions
Ugur Korkut Pata: Investigation, Conceptualization, Methodology,
Formal analysis, Validation, Software, Writing - original draft, Writing -
review & editing. Hasan Murat Ertugrul: Writing - original draft,
Writing - review & editing.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
Acknowledgements:
None, no fund received.
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