Determinants of environmental degradation in ASEAN–OIC countries: environmental Kuznets Curve in an Islamic perspective

This study examines the relationship between economic growth, energy consumption, and environmental degradation in Brunei Darussalam, Malaysia, and Indonesia, three Southeast Asian members of the Organisation of Islamic Cooperation (OIC). Using annual data from 1992 to 2021, it applies an Error Correction Model (ECM) and Granger causality tests to separate short-run dynamics from long-run equilibrium relationships among CO₂ emissions, GDP per capita, and energy consumption. Short-run results indicate that energy consumption significantly increases CO₂ emissions in Indonesia and Malaysia, while GDP per capita has a positive and significant effect in Malaysia and Brunei Darussalam. The error correction term is negative and significant for Indonesia and Malaysia, confirming adjustment toward long-run equilibrium, whereas Brunei Darussalam shows weaker adjustment, reflecting structural heterogeneity across countries. Granger causality findings further reveal cross-country differences in the causal links between energy use and GDP growth. In the long run, Indonesia and Malaysia display strong positive associations among GDP per capita, energy consumption, and CO₂ emissions, implying that sustained growth under fossil-energy dependence intensifies environmental pressures. By contrast, Brunei Darussalam does not support the conventional Environmental Kuznets Curve (EKC) hypothesis, highlighting the non-universality of EKC patterns among ASEAN–OIC economies. Policy implications emphasise country-specific energy and environmental strategies, particularly energy efficiency and renewable energy development. Beyond the empirical model, Islamic finance instruments are positioned as complementary and interpretive mechanisms to strengthen ethical environmental stewardship and support sustainable development.