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International Journal of Islamic Economics and Business Sustainability (IJIEBS)

Democracy and Environmental Sustainability: A New Study Based on GDP per Capita in Developing Islamic Countries (OIC)

Abstract

Purpose - This study investigates the moderating role of democracy in shaping environmental sustainability, measured by CO₂ emissions, across 35 developing member countries of the Organization of Islamic Cooperation (OIC).

Design/methodology/approach - A dual-model econometric framework is employed, combining the System Generalized Method of Moments (SYS-GMM) to address endogeneity and dynamic panel bias with the Panel Autoregressive Distributed Lag (ARDL) model to capture both short-run dynamics and long-run equilibrium. This approach enables a nuanced analysis of how democracy conditions the effects of GDP per capita, agricultural productivity, and renewable energy on emissions.

Findings - The results reveal a complex and non-linear role of democracy. Renewable energy consumption significantly reduces emissions, while agricultural activity increases them. Democracy functions as a significant moderator by helping decouple GDP per capita from emissions, consistent with the Environmental Kuznets Curve (EKC) hypothesis. However, democracy alone does not mitigate the environmental impacts of agriculture. These findings suggest that democratic governance enhances sustainability outcomes only when accompanied by accountability mechanisms and effective policy implementation.

Implications - Policy recommendations differ by income group: Low-Income Countries should adopt “green from the ground up” strategies, leveraging international support for decentralized renewable energy and climate-smart agriculture. Lower-Middle-Income Countries should focus on grid modernization, subsidy reform, and institutional strengthening. Upper-Middle-Income Countries are encouraged to pursue advanced tools such as carbon pricing and green technology investment.

Originality/value - This study reframes democracy not solely as a direct determinant but as a conditional variable that shapes how economic activities affect the environment. By applying moderated regression within a dual-model framework, it offers novel insights and an actionable roadmap for OIC policymakers to balance economic growth with environmental preservation.

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