Does the quality of institutions and education strengthen the quality of the environment? Evidence from a global perspective

Highlights: • The role of institutions and education in environmental degradation are examined. • Findings support the EKC hypothesis. • Education facilitates renewable energy and reduces environmental degradation. • Institutions facilitate the effects of FDI and renewable energy on the environment. This paper explores the determinants of global environmental degradation by utilising a newly formulated conceptual framework to examine whether the quality of institutions in a country plays a moderating role on environmental degradation. This issue has become a widespread concern in academia but few studies have accounted for these moderating roles. This is the scientific novelty of this study in comparison to previously published works. The study utilises unbalanced panel data from 114 countries. The dynamic panel GMM estimator is deployed to estimate a newly constructed global environmental degradation model. Generally, our findings support the Environmental Kuznets Curve (EKC) hypothesis where we find the EKC has an inverted-U shape. More importantly, we find that institutional quality and human capital facilitate the impacts of both foreign direct investment (FDI) and renewable energy in reducing environmental degradation. These findings not only advanced the prior environmental literature but it also provides a clearer picture for policymakers on the channel of institutional quality and human capital in protecting the environment. Therefore, corresponding policy measures should focus on improving the quality of institutions and human capital to effectively reduce environmental degradation for sustainable development.