Do the grey clouds of geopolitical risk and political globalization exacerbate environmental degradation? Evidence from resource-rich countries

Abstract

Geopolitical risk is a potential impact of economic, political, social, and environmental aspects on the stability and security of a country or region. This risk can range from minor disruptions to major conflicts that can significantly affect the global economy and may affect countries in various ways, including disruptions to supply chains, demographic shifts, cultural differences, social and climate change, natural disasters, and resource depletion. This study examines the impact of geopolitical risk, political globalization and military expenses on environmental deterioration concerning natural resource abundance in countries from 1985 to 2020. The results based on Pooled Mean Group Autoregressive Distributive Lag (PMG-ARDL) econometric estimation indicate a direct effect of geopolitical risk and military expenses on carbon dioxide emissions (CO2) emissions in the long-as well as the short-run, whilst political globalization and Foreign Direct Investment (FDI) preserve ecological quality. These findings, confirmed by panel estimations including fully modified ordinary least squares (FM-OLS) and dynamic ordinary least squares (D-OLS), indicate that good governance in a country mitigates the geopolitical risk that can protect the environment quality. The study's findings propose various policy suggestions to save the ecological quality in natural resource abundance countries.