Investigating the Effect of Good Governance on Environmental Quality: An Emphasis on the Role of Institutional Quality in Achieving Sustainable Development

Good governance plays a key role in creating sustainable development and efficient management of public resources and is recognized as one of the main tools for improving people's quality of life and social justice. The aim of this study is to investigate the impact of good governance indicators on carbon dioxide emissions in selected Asian countries that contribute significantly to global carbon dioxide emissions. According to the threshold panel model, the CO2-GDP relationship is considered dependent on good governance indicators. The results of the model estimation show that with the improvement of good governance indicators and exceeding the threshold level, the coefficients of GDP variables in the CO2-GDP relationship change in such a way that less carbon is emitted per unit of GDP. The greatest reduction in carbon dioxide emissions is achieved by improving the regulatory quality. Also at higher levels of GDP, improving governance indicators leads to a greater reduction in carbon dioxide emissions. In all indicators, except for the political stability, the threshold level is lower than the average of the index. In other words, at higher levels of the political stability, we can witness its positive impact on environmental quality. The existence of an N-shaped environmental Kuznets curve for this group of countries indicates that GDP does not solve environmental problems in the long run. Pollution does not automatically disappear with economic growth and good governance can be a solution to sustainable development. Therefore, strategies to improve institutional quality can be useful in achieving of sustainable development.