New Insights into Development of an Environmental – Economic Model Based on a Composite Environmental Quality Index: A Comparative Analysis of Economic Growth and Environmental Quality Trend

Document Type : Research Article

Authors

1 Faculty of Natural Resources and Environment, Science and Research Branch, Islamic Azad University, Tehran, Iran

2 Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

3 Faculty of Agricultural Sciences and Food Industry, Science and Research Branch, Islamic Azad University, Tehran, Iran

Abstract

In order to fill the research gap regarding the use of a comprehensive index that includes all dimensions of environmental pollution, this study sought to develop a composite environmental quality index to tackle with the possible bias and remove the possible linearity in the experimental research model. Principal Component Analysis (PCA) and Artificial Neural Network (ANN) methods were used to obtain this composite index. This study used six environmental indicators from two groups of Organization of Petroleum Exporting Countries (OPEC) and Organization for Economic Co-operation and Development (OECD) during 2008-2019. According to the obtained error criteria related to the two methods, ANN method was used to calculate the weight of environmental indicators due to having the lowest error criteria and therefore reliable results. Finally, using this composite index, the trend of economic growth and environmental quality were analyzed graphically. The results showed that along with the upward trend of economic growth, the quality of environment follows a downward trend in OPEC countries and an upward trend in OECD countries. At the end of this paper, some limitations of study are presented, and some suggestions for future studies are provided as well.

Keywords

References

Alemzero, D.A., Sun, H., Mohsin, M., Iqbal, N. and Nadeem, M. (2020). Assessing energy security in Africa based on multi-dimensional approach of principal composite analysis. Environ. Sci. Pollut. Res., 28, 2158–2171. 
Antonopoulos, I., Robu, V., Couraud, B., Kirli, D., Norbu, S., Kiprakis, A., Flynn, D., Elizondo-Gonzalez, D., and Wattam, S. (2020). Artificial intelligence and machine learning approaches to energy demand-side response: A systematic review. Renew. Sust. Energ. Rev. 130, 109899.
Ahmadi, M., Falahati, A., and Delangizan, S. (2020). Transition Dynamic Analysis of the Regional Disparity in Iran (Case Study: Iran Provinces). Quarterly Journal of Quantitative Economics 17(1):85-119. 
Adu, G., Marbuah, G, and Mensah, J.T. (2013). Financial development and economic growth in Ghana: Does the measure of financial development matter?. Rev. Develop. Finance., 3(4), 192–203. 
Ahmed, Z., Wang, Z., Mahmood, F., Hafeez, M., and Ali, N. (2019). Does globalization increase the ecological footprint? Empirical evidence from Malaysia. Environ. Sci. Pollut. Res. 26, 18565–18582. 
Arminen, H., and Menegaki, A.N. (2019). Corruption, climate, and the energy-environment growth Nexus. Energ. Econ. 80, 621-634
Asici, A.A. (2013). Economic Growth and its Impact on Environment: A Panel Data Analysis. Ecol. Indic., 24, 324-333. 
Aydin, C., Esen, O., and Aydin, R. (2019). Is the ecological footprint related to the Kuznets curve a real process or rationalizing the ecological consequences of the affluence? Evidence from PSTR approach. Ecol. Indic., 98, 543–555. 
Azzam, M., Awad, M., and Zeaiter, J. (2018). Application of evolutionary neural networks and support vector machines to model NOx emissions from gas turbines, Journal of Environmental Chemical Engineering., 6(1), 1044-1052. 
Bello, M.O., Solarin, S.A., and Yen, Y.Y. (2018) The impact of electricity consumption on CO2 emission, carbon footprint, water footprint and ecological footprint: The role of hydropower in an emerging economy. J. Environ. Manage., 219, 218-230. 
Cano-Orellana, A., and Delgado-Cabeza, M. (2015). Local ecological footprint using Principal Component Analysis: A case study of localities in Andalusia (Spain). Ecol. Indic., 57, 573-579. 
Charoenkit, S., and Kumar, S. (2014). Environmental sustainability assessment tools for low carbon and climate resilient low-income housing settlements. Renew. Sust. Energ. Rev., 38, 509-525. 
Chen, J., Li, Z., Song, M., and Dong, Y. (2020). Decomposing the global carbon balance pressure index: evidence from 77 countries. Environ. Sci. Pollut. Res. 28, 7016–7031. 
Chu, K., Liu, W., and She, Y. (2018). Modified Principal Component Analysis for Identifying Key Environmental Indicators and Application to a Large-Scale Tidal Flat Reclamation. Water-SUI., 10(69), 1-18. 
Coban, S., and Topcu, M. (2013). The nexus between financial development and energy consumption in the EU: a dynamic panel data analysis. Energ. Econ., 39(3), 81–88.
Danish., Ulucak, R., and Khan, SU-D. (2020). Determinants of the ecological footprint: Role of renewable energy, natural resources, and urbanization. Sustain. Cities. Soc. 54, 101996. 
Danish., and wang, Z. (2019). Investigation of the ecological footprint’s driving factors: What we learn from the experience of emerging economies. Sustain. Cities. Soc. 49, 101626. 
Danish., Wang, Z. (2019). Does biomass energy consumption help to control environmental pollution? Evidence from BRICS countries. Sci. Total. Environ. 670, 1075–1083. 
Dayhoff, J.E. (1990). Neural Networks Principles, Prentice-Hall International, U.S.
Destek, M.A., Ulucak, R., and Dogan, E. (2018). Analyzing the environmental Kuznets curve for the EU countries: the role of ecological footprint. Environ. Sci. Pollut. Res., 25, 29387–29396.
Dogan, E., and Inglesi-Lotz, R. (2020). The impact of economic structure to the environmental Kuznets curve (EKC) hypothesis: evidence from European countries. Environ. Sci. Pollut. Res. 27, 12717–12724. 
Dogan, E., Ulucak, R., Kocak, E., and Isik, C. (2020). The use of ecological footprint in estimating the Environmental Kuznets Curve hypothesis for BRICST by considering cross-section dependence and heterogeneity. Sci. Total. Environ. 723(25), 138063.
Elsalih, O., Sertoglu, K., and Besim, M. (2020). Environmental performance, comparative advantage of crude oil and the role of institutional quality. Environ. Sci. Pollut. Res., 27, 3489–3496.
Esty, D.C., Levy, M., Srebotnjak, T., de Sherbinin, A., Kim, C.H., and Anderson, B. (2006). Pilot 2006 Environmental Performance Index. Yale Center for Environmental Law and Policy, New Haven.
Fakher, H.A. (2021). The Threshold Impact of Financial Development on the Composite Environmental Quality Index with Emphasis on the Role of Research and Development: Using multi-criteria decision making and Principal Component Analysis.Decisions and operations Research., Articles in Press https://doi.org/10.22105/dmor.2021.272043.1321
Fakher, H.A. (2019). Investigating the determinant factors of environmental quality (based on ecological carbon footprint index). Environ. Sci. Pollut. Res. 26(10), 10276-10291.
Fakher, H.A., Ahmadian, M., Abedi, Z., and Shaygani, B. (2018). Bayesian Econometrics Approach in Determining of Effecting Factors on Pollution in Developing Countries (based on Environmental Performance Index). Pollution., 4(3), 447-457.
Fakher, H.A., and Abedi, Z. (2017). Relationship between Environmental Quality and Economic Growth in Developing Countries (based on Environmental Performance Index). Environmental Energy and Economic Research., 1(3), 299-310.
Faisal, F., Tursoy, T., and Berk, N. (2018). Linear and non-linear impact of Internet usage and financial deepening on electricity consumption for Turkey: empirical evidence from asymmetric causality. Environ. Sci. Pollut. Res., 25(12), 11536–11555. 
Fathi Assi, A., Isiksal, A.Z., and Tursoy, T. (2020). Renewable Energy Consumption, Financial Development, Environmental pollution, and Innovations in the ASEAN +3 group: Evidence from (P-ARDL) model. Renew. Energ. 165(1), 689-700. 
Fayers, P.M., and Hand, D.J. (2002) Causal variables, indicator variables and measurement scales: An example from quality of life. J. R. Stat. Soc. A. Stat., 165, 233–261.
Ganda, F. (2019). The environmental impacts of financial development in OECD countries: a panel GMM approach. Environ. Sci. Pollut. Res. 26, 6758–6772.
Gnègnè, Y. (2009). Adjusted net saving and welfare change. Ecol. Econ. 68(4), 1127–1139. 
Godil. D.I, Sharif, A., Rafique, S., and Jermsittiparsert, K. (2020). The asymmetric effect of tourism, financial development, and globalization on ecological footprint in Turkey. Environ. Sci. Pollut. Res. 27, 40109–40120. 
Hargreaves, C.A., and Mani, C.K. (2015). The Selection of Winning Stocks Using Principal Component Analysis. American Journal of Marketing Research, 1(3), 183-188. http://www.aiscience.org/journal/ajmr
Hassan, S.T., Xia, E., Khan, N.H., and Ali shah, S.M. (2019). Economic growth, natural resources, and ecological footprints: evidence from Pakistan. Environ. Sci. Pollut. Res., 26, 2929–2938. 
Ho, H.C., Wong, M.S., Man, H.Y., Shi, Y., and Abbas, S. (2019). Neighborhood-based subjective environmental vulnerability index for community health assessment: Development, validation and evaluation. Sci. Total. Environ., 654, 1082–1090. 
Kassi, D.F., Sun, G., and Ding, N. (2020). Does governance quality moderate the finance-renewable energy-growth nexus? Evidence from five major regions in the word. Environ. Sci. Pollut. Res., 27, 12152-12180. 
Kashyna, O. (2011). Investigating the Environmental Kuznets Curve hypothesis using Environmental Performance Indices. School of Economics and Management, Lund University. 
Kazerooni, A., Asgharpur, H., and Nafisi Moghadam, M. (2020). The Effect of Political Stability and Democracy on Economic Growth in Selected Countries of the Organization of Islamic Cooperation: Dynamic Panel Approach (SYS-GMM). Economic Growth and Development research, 10(39), 55-74. 
Khan, M.A., and Qayyum, A. (2007). Trade, financial and growth nexus in Pakistan (No. 2007, 14). Economic analysis working papers.
Khanna, T. (1990). Foundations of neural networks, Addison-Wesley Pub. Co. USA.
Kongbuamai, N., Zafar, M.W., Zaidi, S.A.H., and Liu, Y. (2020). Determinants of the ecological footprint in Thailand: the influences of tourism, trade openness, and population density. Environ. Sci. Pollut. Res., 27, 40171–40186. 
Lee, Y., and Lin, S. (2020). Vulnerability and ecological footprint: a comparison between urban Taipei and rural Yunlin, Taiwan. Environ. Sci. Pollut. Res., 27, 34624–34637.
Liu, D., Deng, Q., Ren, Z., Zhou, Z., Song, Z., Huang, J., and Hu, R. (2019). Variation Trends and Principal Component Analysis of Nitrogen Oxide Emissions from Motor Vehicles in Wuhan City from 2012 to 2017. Sci. Total. Environ. 704, 134987. 
Long, X., and Ji, X. (2019). Economic Growth Quality, Environmental Sustainability, and Social Welfare in China - Provincial Assessment Based on Genuine Progress Indicator (GPI). Ecol. Econ., 159, 157-176. 
Mazziotta, M., Pareto, A. (2019). Use and Misuse of PCA for Measuring Well-Being. Soc. Indic. Res., 142, 451–476. 
Mohammadi, N., Haji, G., and Fotros, M.H. (2020). The Impact of Combined Fiscal Decentralization on Economic Growth in Proviences of Iran. Economic Growth and Development research., 10(38), 98-75. 
Nathaniel, S.P. (2020). Ecological footprint, energy use, trade, and urbanization linkage in Indonesia. Geo. Journal., https://doi.org/10.1007/s10708-020-10175-7
Nathaniel, S., Anyanwu, O., and Shah, M. (2020). Renewable energy, urbanization, and ecological footprint in the Middle East and North Africa region. Environ. Sci. Pollut. Res., 27, 14601–14613. 
Naqvi, S.A.A., Shah, S.A.R., Anwar, S., and Raza, H. (2021). Renewable energy, economic development, and ecological footprint nexus: fresh evidence of renewable energy environment Kuznets curve (RKC) from income groups. Environ. Sci. Pollut. Res., 28, 2031-2051.
Neagu, O., Ardelean, D.I., and Lazar, V. (2017). How is environmental performance associated with economic growth? A world cross-country analysis. Studia Universitatis “Vasile Goldis” Arad Econ Ser., 27(3), 15–32. 
NFA (2019) Working guidebook to the national footprint accounts: 2018 edition. Glob Footpr Rep 73.
Olafsson, S., Cook, D., Davidsdottir, B., and Johannsdottir, L. (2014). Measuring countries׳ environmental sustainability performance – A review and case study of Iceland. Renew. Sustain. Energ. Rev. 39, 934-948. 
Ouyang, Y., and Li, P. (2018). On the nexus of financial development, economic growth, and energy consumption in China: New perspective from a GMM panel VAR approach. Energ. Econ., 71, 238-252. 
Ozcan, B., Tzeremes, P.G., and Tzeremes, N.G. (2020). Energy consumption, economic growth and environmental degradation in OECD countries. Econ. Model., 84, 203-213. 
Ozcan, B., Tzeremes, P., and Dogan, E. (2019). Re-estimating the interconnectedness between the demand of energy consumption, income, and sustainability indices. Environ. Sci. Pollut. Res., 26, 26500–26516. 
Pata, U.K. (2021). Renewable and non-renewable energy consumption, economic complexity, CO2 emissions, and ecological footprint in the USA: testing the EKC hypothesis with a structural break. Environ. Sci. Pollut. Res., 28, 46–861. 
Peter, H. (2010). Determinants of the adjusted net saving rate in developing economies. International Review of Applied Economics., 24(5), 591-608. 
Rizk, R., and Slimane, M.B. (2018). Modelling the relationship between poverty, environment, and institutions: a panel data study. Environ. Sci. Pollut. Res., 25(31), 31459–31473. 
Sabir, S., and Gorus, M.S. (2019). The impact of globalization on ecological footprint: empirical evidence from the South Asian countries. Environ. Sci. Pollut. Res., 26, 33387–33398. 
Saci, K., and Holden, K. (2008). Evidence on growth and financial development using principal components. Appl. Financ. Econ., 18(19), 1549–1560. 
Sarkodie, S.A., Strezov, V. (2019). Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries. Sci. Total. Environ. 646, 862–871.
Sarkodie, S.A. (2018). The invisible hand and EKC hypothesis: what are the drivers of environmental degradation and pollution in Africa?. Environ. Sci. Pollut. Res., 25, 21993–22022.
Salahuddin, M., and Gow, J. (2019). Effects of energy consumption and economic growth on environmental quality: evidence from Qatar. Environ. Sci. Pollut. Res., 26, 18124–18142. 
Salahuddin, M., Alam, K., Ozturk, I., and Sohag, K. (2018). The effects of electricity consumption, economic growth, financial development and foreign direct investment on CO2 emissions in Kuwait. Renew. Sust. Energ. Rev. 81(2), 2002–2010.
Skondras, N.A., Karavitis, C.A., Gkotsis, I.I., Scott, P.J.B., Kaly, U.L., and Alexandris, S.G. (2011). Application and assessment of the Environmental Vulnerability Index in Greece. Ecol. Indic., 11, 1699–1706. 
Shah, S.A.A., Zhou, P., Walasai, G.D., and Mohsin, M. (2019). Energy security and environmental sustainability index of South Asian countries: A composite index approach. Ecol. Indic., 106, 105507. 
Singh, N., and Aneja, R. (2019). Estimation of Financial Development of India: A PCA Approach. Journal of Information and Computational Science., 9(12), 899-908. 
Ssali, M.W., Du, J., Mensah, I.A., and Hongo, D.O. (2019). Investigating the nexus among environmental pollution, economic growth, energy use, and foreign direct investment in 6 selected sub-Saharan African countries. Environ. Sci. Pollut. Res. 26, 11245–11260. 
Tripathi, M., and Singal, S.K. (2019). Use of Principal Component Analysis for parameter selection for development of a novel Water Quality Index: A case study of river Ganga India. Ecol. Indic., 96, 430–436. 
Usman, O., Alola, A.A., and Sarkodie, S.A. (2020). Assessment of the role of renewable energy consumption and trade policy on environmental degradation using innovation accounting: Evidence from the US. Renew. Energ., 15, 266-277.
Van, Der., Maaten, L., Postma, E., and Van Den Herik, J. (2009). Dimensionality Reduction: A Comparative. Mach. Learn. Res., 10(1-41), 66–71.
Yilanci, V., and Gorus, M.S. (2020). Does economic globalization have predictive power for ecological footprint in MENA counties? A panel causality test with a Fourier function. Environ. Sci. Pollut. Res., 27, 40552–40562. 
Zeinalzadeh, K., and Rezaei, E. (2017). Determining spatial and temporal changes of surface water quality using principal component analysis. J. Hydrol-Reg. Stud., 13, 1-10.
Zhong, X., and Enke, D. (2017). Forecasting Daily Stock Market Return Using Dimensionality Reduction. Expert. Syst. Appl. 67, 126-139. 
Zhang, D., Shi, X., and Sheng, Y. (2015). Comprehensive measurement of energy market integration in East Asia: An application of dynamic principal component analysis. Energ. Econ., 52(B), 299-305.
Zhang, J., Wang, C.M., Liu, L., Guo, H., Liu, G.D., Li, Y.W., and Deng, S.H. (2014). Investigation of carbon dioxide emission in China by primary component analysis. Sci. Total. Environ., 472, 239-247.
Environmental Energy and Economic Research
Volume 5, Issue 3
August 2021
Pages 1-24

Files

Share

How to cite

Statistics