This study investigates the key drivers of economic growth and environmental sustainability in Asian countries. Specifically, we examinine the income–emissions nexus in the light of the environmental Kuznets curve (EKC) theory employing the advanced method of two-stage squares least squares fixed-effects instrumental variable for a panel of 31 developing Asian economies during 2000–2023. The empirical results provide robust evidence of a nonlinear, inverted U-shaped relationship between per capita income and CO₂ emissions, indicating that economic growth initially intensifies environmental pressure before contributing to environmental improvement at higher income levels. Beyond income dynamics, energy consumption, foreign direct investment, and agricultural activity are found to be important drivers of environmental degradation, while renewable energy consumption plays a mitigating role. Institutional quality emerges as a central determinant of environmental sustainability, exerting both a direct emissions-reducing effect and a significant moderating influence on the impacts of economic growth and energy use. Estimates from the interaction models suggest that the EKC turning point occurs at an income level of approximately USD 14,000–15,000 per capita, underscoring the role of institutions in accelerating the transition toward more sustainable growth paths. These findings offer many important polices implications for shaping and/or promoting economic and environmental sustainability in Asia and beyond in the years to come.
Khuc et al. (Mon,) studied this question.