Regulatory quality, energy consumption, and environmental sustainability in a developing economy: Evidence from a Bayesian vector error correction model

Sustainable management of the environment is among the primary objectives of sustainable development. Although environmental regulation is widely studied in advanced economies, its effectiveness in developing nations like Nigeria, characterized by weak regulatory and enforcement institutions, remains underexplored. Based on the Stochastic Impacts by Regression on Population, Affluence, and Technology framework, and using ecological balance (EB) and carbon dioxide (CO 2 ) emissions (COEs) as environmental indicators, this article investigates the impact of environmental regulations on environmental sustainability in Nigeria in an augmented framework that includes renewable energy consumption and gross domestic product as additional regressors. Using annual time series data from 1990 to 2022, the study employs the novel Bayesian Vector Error Correction Model, which improves the robustness of the parameter estimates by utilizing the Inverse Wishart Prior distribution. Robust postsimulation is conducted using the Gibbs sampling technique to generate 5000 iterations. The posterior mean estimates indicate that a one-standard-deviation improvement in regulatory quality (RQ) is associated with a decrease of 0.027 units in ecological deficit and a decrease of 0.111 units in COEs, though the credible intervals for the latter include zero. The results also show that higher RQ is associated with a decreased deficit between ecological footprint and biocapacity (i.e. improved EB) and CO 2 , indicating that effective regulatory frameworks may lead to more sustainable environmental outcomes. The results also demonstrate that the effect of regulating the environment is stronger on COEs compared to EB, implying that more stringent environmental regulations are necessary to promote EB than to reduce COEs. Nigeria's weak enforcement institutions amplify the urgency of reforms; hence, there is a need to improve RQ to ensure the efficient administration of environmental legislation in Nigeria. Relevant policy inferences and recommendations have been provided in the paper.