Environmental Sustainability and Economic Development in Central Asia: The Role of Energy, Trade, and Foreign Investment

Abstract

This study investigates the relationship between carbon dioxide (CO2) emissions, economic growth, energy consumption, foreign direct investment, 
and trade openness in Kazakhstan, the Kyrgyz Republic, and Uzbekistan over the period 1997–2024. Using panel data from the World Bank and applying the Pooled Mean Group estimator within a panel Autoregressive Distributed Lag framework, the analysis examines both short-run and long-run dynamics among the variables. The results reveal a long-run equilibrium relationship between carbon emissions and their key economic determinants. Energy consumption, foreign direct investment, and trade openness are found to increase CO2 emissions in the long run, while economic growth contributes to environmental improvement. The findings highlight the dominant role of energy use in driving emissions and the environmental implications of investment and trade integration. These results suggest that Central Asian economies should promote renewable energy, enhance energy efficiency, and adopt environmentally sustainable investment and trade policies to achieve balanced economic growth and environmental sustainability.