Exploring the Non-Linear Impact of Economic Complexity, Nuclear Energy, and Financial Development on Environmental Quality

The latest report on Sustainable Development Goals (SDGs) 2023 indicates that the progress around environmental concerns has decreased significantly. It is also an indication that the existing program of realization of environmental sustainability (SDG 13) is lacking and needs a complex policy framework. Although prior studies have outlined several factors leading to environmental degradation; the influence of financial development and the research and development of nuclear energy on the environmental quality (EQ) of the G-7 countries has been highly ignored. In order to fill this gap and develop an inclusive policy framework toward the achievement of the SDGs, this research study is a unique study that explores the impacts of financial development (FD), nuclear energy research and development (R&D), economic complexity (ECI), energy consumption (EC), foreign direct investment (FDI) and economic growth (EG) on the environmental quality with data on load capacity factor (LCF) of G-7 countries between 1996 and 2020. The study uses the non-linear autoregressive distributed lag (NARDL) technique to examine the asymmetry of impacts of the variables under consideration. The results indicate that both positive and negative shocks in financial development led to the degradation of the environment. Moreover, it is possible to improve the quality of the environment through more investment in research and development. The positive correlation with the improvement in environmental quality is the negative shocks in the complexity of the economy and positive shocks in foreign direct investment and positive shocks in economic growth. Conversely, there are negative foreign direct investment shocks that affect the quality of the environment negatively. Considering these findings, this study recommends an all-inclusive policy agenda to achieve SDG 13.