An investigation of the relationship between climate risk and efficient use of natural resources: New findings from new estimation

• We examine impacts of efficient natural resources rents on climate risk. • Natural resources rents have a favorable impact on climate risk. • Natural resource rents enhance climate risk in the long term. • Favorable impacts occur in a nation with a well-developed institution. This paper empirically analyzes the influence of natural resource usage on climate risks and examines the aggregate natural rents, which include gas, coal, and mineral rents, in connection with a range of climatic hazards, such as riverine flooding, sea rise, storm winds, earthquakes, and tsunamis. Over the years 2010–2022, a sample of 154 nations was subjected to a variety of econometric methodologies. Our estimation results demonstrate that natural rents generally lead to a reduction in climate risks. However, when we utilize alternative measures of natural rents, the results show that mineral rents and coal gas rents are the factors leading to the decrease of climate hazards, while coal rents drive them up. We provide evidence that resource extraction directly affects climate hazards, but efficient long-term management of natural resources demonstrates the possibility of climate risk mitigation. To further reduce climate threats, institutional quality is the main element affecting how natural resources are used.