Econometric Assessment of Institutional Quality in Mitigating Global Climate-Change Risk

Abstract

Background: Environmental deterioration is the alarming situation that results from rapid urbanization and development. The rising temperature and climate volatility are accounted for by the massive carbon dioxide (CO2) emissions. The research on climate-change mitigation is trying to curtail the situations before they become irreversible and unmanageable. This study explores the role of institutions in mitigating climate change by moderating the impact of environmental quality on climate change risk. Methodology: Global data sets have been collected from world big data depositories like the World Economic Forum (WEF), the World Development Indicators (WDI), and the International Country Risk Guide (ICRG). Countries that are listed in WEF were used as the sample of the study. An analysis was based on 114 countries that are based on the availability of data. For estimation, descriptive statistics, correlation analysis, change effects, and a Panel Feasible Generalized Least Squares (FGLS) model were used for estimating the results. Results: The global assessment indicates that CO2 emissions increase the climate risk, but its impact can be reduced by increasing the quality of institutions. Additionally, an increase in renewable energy consumption and economic growth reduces the climate risk. Implications: It is an instrumental study that empirically investigated the role of institutions in reducing climate risk by moderating CO2 emissions. The results of this study will help policymakers to formulate policies regarding environmental protection.