Carbon, Capital, and the Climate: The Economic Puzzle of CO₂ Emissions in South Asia

Abstract

The rapid rise in carbon dioxide (CO₂) emissions is a major contributor to global warming, making it crucial to understand the key drivers, especially in vulnerable regions like South Asia. This study analyzes the determinants of CO₂ emissions in South Asia from 2000 to 2021 using Environmental Kuznets Curve (EKC) modeling, multiple linear regression, and panel data analysis. Findings indicate that GDP per capita is a primary driver of emissions, while renewable energy helps mitigate carbon emissions. However, the EKC model does not confirm an inverted U-shaped relationship, suggesting South Asia has yet to reach the turning point where economic growth curbs emissions. The findings also suggest that urbanization, industrialization, and per capita energy use contribute to emissions. Panel data analysis, incorporating the Paris Agreement as a structural break, reveals its limited impact on reducing emissions in the region, stressing the need for stronger policy enforcement. The study underscores the importance of accelerating renewable energy adoption, promoting sustainable urbanization, and decarbonizing industries to address climate challenges. Policymakers need to enhance regional cooperation and integrate low-carbon strategies to achieve sustainable development while combating climate change in South Asia.