Structural Transformation and Environmental Sustainability in SAARC Nations: Evidence from Ecological Footprint and Transmission Channels

Achieving a carbon-neutral ecosystem requires more than ambition—it demands the proactive engagement of national governments, the long-term dedication of global institutions and the strategic deployment of innovative mitigation strategies. South Asia’s rapid economic shift from agriculture to industry and services has raised concerns about rising ecological pressure, yet evidence on this nexus remains limited. Against this background, this study looks at the impact of structural transformation (STR) on environmental quality in seven South Asian nations from 1991 to 2023, applying both static and dynamic panel data methodologies, including LSDVC, CUP-BC and FMOLS estimators, to ensure the generated outcome’s legitimacy. The study concludes that STR has a weak but statistically significant negative influence on ecological footprint, meaning that economic reconstruction, particularly the transition from agriculture to services, can slightly improve environmental quality. According to mediation analysis, STR influences environmental outcomes via five major transmission channels: urbanization, GDP per capita, natural resource rents, inflation and arable land. Urbanization has the greatest effect, accounting for 77.6% of STR’s indirect environmental impact. Natural resource rents and arable land use have a negative influence, underlining the environmental costs of resource extraction and agricultural development. The findings demonstrate that sustainable STR necessitates policies aimed at efficient urban development, resource regulation and low-carbon economic activities. By situating the findings within the broader Sustainable Development Goals agenda, this study offers not just diagnosis but direction. It calls for a new development paradigm in South Asia: one where economic progress is harmonized with ecological resilience through smart urban planning, clean energy transitions and institutional reform. The path to sustainability lies not in resisting change but in redesigning its course.