Green pathways to carbon neutrality: evidence from South Asian economies

Abstract Comprising eight nations and over one-fifth of the world’s population, the South Asian Association for Regional Cooperation (SAARC) is an important bloc. Its green-economy transition relies on coordinated efforts by national and local governments, private firms, community groups, and international agencies, and is supported by renewable-energy incentives, carbon-pricing mechanisms, sustainable land-use policies, and green-finance initiatives. This study aims to identify effective strategies and policy recommendations that support economic sustainability and carbon neutrality in the SAARC region through a thorough analysis of the causal relationships between economic indicators and carbon emissions. The study utilizes the Panel cointegration tests (the Kao test and the Pedroni tests), and the Panel Autoregressive Distributed Lag (ARDL) approach to examine the interconnections between economic growth, use of renewable energy, social entrepreneurship, and carbon emission in SAARC countries. The current study aims to examine the short-term dynamics and long-term equilibrium between important variables like Gross Domestic Product (GDP), natural resources (NR), globalization index (GI), industrial structure (IS), renewable energy consumption (REC), and carbon dioxide emissions (CO₂). Our results show that a 1 percent increase in globalization raises GDP by 2.61 percent, a 1 percent increase in the sustainable development index raises GDP by 0.10 percent, and a 1 percent increase in industrial structure raises GDP by 0.56 percent. Also, a 1percent increase in natural resources causes CO₂ emissions to go up by 0.057 percent in the long term, while a 1 percent rise in globalization and industrial structure causes CO₂ emissions to go up by 0.278 percent and 0.222 percent, respectively. The results show that REC and carbon emissions are inversely related to each other, suggesting that a 1 percent increase in REC may lead to a long-term reduction in CO₂ emissions of 0.316 percent. Our findings imply that SAARC policymakers should boost REC, realign industrial structures, and implement carbon‐pricing mechanisms to drive economic growth while achieving carbon neutrality. With the help of these findings, policymakers can make informed choices that will advance sustainable development and help the SAARC nations become carbon neutral. Graphical Abstract