Renewable energy, FDI, and trade openness for environmental sustainability in Bangladesh: insights from load capacity factor and Fourier functions

This study aims to explore the effects of renewable energy consumption, trade openness, and foreign direct investment on environmental sustainability in Bangladesh, assessed through innovative indicators of load capacity factor and inverted load capacity factor. The research utilizes Fourier ARDL, Fourier NARDL, Bayer-Hanck cointegration, and Fourier Toda-Yamamoto causality methods, employing annual data from 1990 to 2022 to examine both symmetric and asymmetric relationships. These advanced econometric techniques consider structural breaks, long-term dependencies, and nonlinear interactions between variables. The main findings indicate that renewable energy consumption positively influences the load capacity factor, enhancing energy efficiency and grid stability while reducing the inverted load capacity factor, which signifies environmental inefficiency. Foreign direct investment shows a dual effect: it boosts the load capacity factor when aligned with sustainable practices but leads to environmental degradation if unregulated. Trade openness fosters economic growth but has mixed effects on environmental sustainability and asymmetric impacts on the load capacity factor. The Fourier Toda-Yamamoto causality test confirms unidirectional causality from renewable energy consumption to the load capacity factor and bidirectional causality between foreign direct investment and trade openness with the load capacity factor. These findings support the Environmental Kuznets Curve hypothesis, which states that economic growth initially harms environmental quality but eventually promotes sustainability as green policies are implemented. The novelty of this research lies in the use of the load capacity factor and inverted load capacity factor as new sustainability indicators, moving away from traditional carbon emission-based metrics. Fourier-based econometric models enhance the robustness of the study by capturing cyclical variations and nonlinear interactions, thereby providing a more precise analysis of environmental sustainability dynamics. These findings contribute to redefining sustainability assessment frameworks in emerging economies. The policy recommendations include expanding renewable energy infrastructure through incentives, implementing green investment regulations for foreign investors, and adopting environmentally conscious trade policies. These measures will enable Bangladesh to balance economic growth and environmental sustainability and align its energy strategies with the Sustainable Development Goals.