The role of economic freedom in achieving the environmental sustainability for the highest economic freedom countries: testing the environmental Kuznets curve hypothesis

In the study, the relationship between ecological footprint, economic freedom, renewable energy consumption and economic growth is analysed under the scope of environmental Kuznets curve (EKC) hypothesis. Here, �fteen countries with the highest economic freedom for the period 1996–2018 are examined i.e., Australia, Canada, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Singapore, South Korea, Sweden, and Switzerland. The long-term relationship between the variables is examined using the panel cointegration test. According to the test results, it has been observed that the variables in the EKC model act together in the long run. According to the long term estimation results, it is seen that economic freedom decreases the ecological footprint, namely environmental degradation, in Canada, while it increases in Estonia. Furthermore, it is concluded that renewable energy reduces the ecological footprint in Australia, Denmark, Luxembourg, Norway, Singapore, and Switzerland. Nevertheless, it has been determined that the EKC hypothesis is valid for Canada, Denmark, and Singapore, but not for other countries.


Introduction
In the globalizing world, competition in economies brings along many problems. Environmental pollution is one of the most important one that brings with it global warming, depleted natural resources and increasing carbon emissions. Since this is a common problem of all countries, many international conferences related to the environment have been held, such as the climate policies of Kyoto (1997) and Paris (2015). For instance, with the Kyoto protocol, an international agreement has been made to set various targets for industrialized countries to reduce the emission of greenhouse gases. In this context, decisions have been taken such as supporting the use of renewable energy and protecting forests and natural water resources. This means that sustainable economic growth also brings environmental sustainability. In order to prevent this environmental degradation, researchers from many elds have tried to produce solutions with studies and still continue. Environmental pollution is not only represented by carbon emissions, but also ecological footprint is one of the important indicators. Created in the early 1990s by Wackernagel (1994) and Rees (1992), the ecological footprint is a key sustainability indicator used to measure our impact on the planet. The difference between the amount of footprint and the amount of biocapacity gives the ecological openness. While a sustainable environment can be explained by the reduction of ecological openness, this can be achieved by reducing the ecological footprint and increasing the biocapacity. In this context, ecological footprint is an important factor in determining environmental policies. When examining the causes of pollution and seeking solutions, not only economic growth, but also economic freedom, energy consumption, and macroeconomic variables that have an impact on economic growth should be analysed together with economic growth. There are several studies in the literature that link the relationship between e cient energy resource use and economic growth to environmental pollution. The increase in economic activities has increased energy consumption more, thus causing more emissions. On the other hand, it is argued that growth under the light of an innovative technology reduces environmental degradation. The effects of variables such as energy consumption and economic growth that may cause environmental degradation can be analysed under the scope of environmental Kuznets curve (EKC) hypothesis. Furthermore, the EKC hypothesis not only examines the relationship between economic growth and the environment, but also deals with issues such as nancial growth, globalization, energy consumption, trade-openness. The EKC hypothesis is developed by Grossman and Krueger (1991) and advocates that economic growth, up to a certain income level, increases environmental pollution with the use of fossil fuels. However, when the threshold value is exceeded, the opposite is true and economic growth reduces environmental pollution. This is achieved through the use of renewable resources (Aydın 2019).
If, EKC hypothesis argues the increase in income decreases environmental pollution by exceeding the target, that is called the threshold value, the focus is on exceeding this target while examining the hypothesis. Therefore, the variables that will reduce the impact of income growth on environmental degradation should be well determined. Looking at the literature, it can be said that economic freedom is one of the variables that have a signi cant effect on environmental degradation due to income increase.
Economic freedom is developed by Heritage Foundation and measured as annual indexes based on 12 quantitative and qualitative factors those are grouped in 4 main categories. The economic freedom index ranges from 0 to 100, with 0 the lowest and 100 the highest freedom score (Heritage Foundation 2022).
With economic freedom, individuals have the right to control their own workforce and property, and they can also work, produce, consume, or invest as they please, and they are supported by governments to act freely in these areas. Economic freedom is closely related to issues such as greater prosperity, a healthier society, a cleaner environment, more wealth per capita, the development of humanity and democracy, and the eradication of poverty. According to many researchers, economic freedom makes markets more e cient and competitive, allowing resources to be used less and more effectively. It is hypothesized that economic freedom can reduce the ecological footprint, along with ecological regulations regarding the production of clean goods and services brought to e cient market consumers. On the contrary, some researchers argue that economic freedom encourages trade liberalization, and thus causing a high proportion of capital-intensive industries to turn to dirty industries. In addition, by stabilizing the macroeconomic environment in the long term, it creates a safer investment mechanism for investors and causes resource-intensive industry combinations, which can increase the ecological footprint.
In the study, 15 countries with the highest economic freedom are selected, and it is aimed to reveal the impact of economic freedom more clearly on the environment. The contribution of the study to the existing literature is that for the rst time, this study investigated the impact of economic freedom on the ecological footprint under the scope of environmental Kuznets curve hypothesis for the 15 countries with the highest economic freedom. According to the author's best knowledge, this is the rst study in this country group and with this method. The literature appears in the second part of the study. The third part includes data, model, and methodology. The part four represents the empirical results of the study and the nal section includes the results of the study and policy recommendations.

Literature Review
In the last few years environmental challenges have caught the attention of researchers. All kinds of economic activities not only increase economic growth and welfare, but also decrease environmental quality by increasing the demand for infrastructures such as food, clean water and energy. In other words, it increases the ecological footprint. In the literature, it is stated that together with economic growth, economic freedom also has effects on environmental pollution. While some studies claim that economic freedom negatively affects environmental quality, others claim that resources are used more effectively by leading to e ciency and market competition.
Economic freedom has positive effects on environmental degradation from many different perspectives. Shahnazi and Shabani (2021) have discussed economic freedom from the perspective of e ciency and have argued that there are positive effects such as relative pricing, energy e ciency and improvement of ecological laws. They also say that it can increase the focus on reducing CO2 emissions and reduce freebies. Arrow et. al. (2004) has examined economic freedom from the perspective of stability and moderation. In this context, economic freedom can affect environmental quality through long-term investments in energy e cient companies and clean renewable energy sources. In addition, increasing competitiveness leads consumers to choose environmentally friendly goods. When the demand for a cleaner environment increase, companies often meet this demand by producing more customer friendly products. In the study of Joshi and Beck (2018), it is stated that economic freedom has a positive effect on CO2 emissions in OECD countries, while the existence of a negative effect in non-OECD countries is mentioned. The effects of openness to international goods markets on pollution is researched by The ndings indicate that investment freedom decreases the cropped land and forest products footprint, while nancial freedom decreases the forest products footprint and increases the grazing land footprint. Moreover, business freedom, property rights and tax burden rise the pressure on the environment and threaten environmental pollution. In addition, while the existence of the environmental Kuznets curve hypothesis is valid for forest products and grazing lands, the hypothesis is not valid for cropped lands.
There are researchers who argue that economic freedom has positive effects on environmental degradation, as well as those who argue that it has negative effects on pollution. The effects of economic freedom on many areas such as poverty, economic growth, environmental degradation, ecological footprint, shing grounds footprint, capitalism, forest-products have been examined. It has been agreed with many studies that economic freedom brings economic growth and wealth and is seen that the free economy increases the growth more (see Mahmood Ashraf (2022) between 1995 and 2020. The ndings suggest that it requires focusing on strategies to minimize ecological degradation and prevent market failure. However, governments that increase economic freedom encourage the creation and growth of more companies. This, in turn, raises national economic conditions and increases ecological degradation.
Alola et. al. (2022b) has found that renewable energy contributes to environmental sustainability across countries by signi cantly reducing the ecological footprint in G7 countries. Furthermore, it has been indicated that economic freedom negatively affects environmental sustainability by rising the ecological footprint of countries.

Data and Model
The existence of the EKC hypothesis in this study for the 15 highest economic freedom countries is examined, namely Australia, Canada, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Singapore, South Korea, Sweden, and Switzerland, for the period 1996-2018. The ecfo, efr, ren, gdp and gdpsq denote ecological footprint (per capita, global hectares per person), index of economic freedom, renewable energy consumption (per capita, total nal consumption, ktoe), per capita GDP (constant 2010 US $) and square of GDP, respectively. The ecfo and efr data are taken from Global Footprint Network database and the Heritage Foundation, respectively. The ren, gdp and gdpsq data are taken from the World Bank database. All data in the study are converted into logarithmic form.
there are heterogeneous slopes.

Panel Unit Root Test
Increasing globalization trends in recent years increase the importance of cross-sectional dependency in economic research. In addition, the crises in the world economy and the transformations in the economic structures of countries make structural breaks extremely important. The most important issue for the reliability of structural break unit root tests is that the break dates, numbers and forms can be determined accurately beforehand. The di culties that may arise here are tried to be overcome by Fourier unit root tests. Because this type of tests allows not only hard breaks but also gradual breaks (soft transitions). During the modeling of the test, it is not necessary to know the breakage form and dates beforehand.
For this reason, the long-run dynamic behaviour of per capita ecological footprint is determined via FPKSS test (Nazlioglu and Karul 2017) in this study. The difference of FPKPSS test from traditional panel unit root methods is that it utilizes Fourier functions to determine structural shifts. Also, unlike the others, the null hypothesis is stationary, while the alternative hypothesis is non-stationary. Furthermore, FPKPSS allows us to smoothly model structural changes and take into account country-speci c heterogeneities dealing with cross-sectional dependency. FPKPSS test procedure has explained as follows: Here, and denote a stochastic term, and unobserved common factor,respectively. denotes the loading weights. The deterministic term of the Eq. (8) as a time-dependent function is denoted by . and are independent and identically distributed (i.i.d.) across i and over t.
For KPSS stationary test the deterministic component is as follows:

10
Here, indicates the amplitude of the changes, while indicates the displacement of the changes. Eq. (10) conjectures the time-varying intersection term, using the nonzero values of and to detect gradual changes in intersection. Furthermore, uctuation of the slope of both intercept and time trend is allowed by FPKPSS test. A Fourier expansion has been improved to approach the non-linear trend : (11) The KPSS procedure of Becker et al. (2006) can estimate the country-speci c statistics, with (k) is as follows: 12 Here, is a partial sum process obtained from the OLS errors in Eq.
Here, DHg is the panel statistic and obtained by adding the individual terms before they are place together. The average statistic is represented by DHp. Various terms are multiplied and then added together. Thus, this statistical value is created. According to Durbin Hausman test, the null hypothesis indicates the absence of cointegration. Conversely, the alternative hypothesis refers to the existence of cointegration in the panel.

Empirical Results
Here, rstly, the cross-sectional dependency of the variables and the EKC model is checked.  Table 1 displays the results of the cross-sectional dependency and indicate that the cross-section dependency of the variables and EKC model exist, according to these three tests. Therefore, unit root and co-integration tests that consider the cross-section dependency is used in the next part of the study. According to the results of homogeneity test shown in Table 2, the null hypothesis of homogeneous slopes is rejected. Thus, the model is heterogeneous. The unit root test results for the variables are displayed in Table 3. According to the results, all variables are stationary at level (I(0)) except the variable lnecfo that is stationary (I(1)) at rst difference at 1% signi cance level. In order to EKC model, the cointegration between ecological footprint and economic freedom, renewable energy consumption, economic growth, and square of economic growth are analysed.  The long-run coe cients of the EKC model and countries are displayed in Table 5. This study has examined the effect of explanatory variables on environmental pollution. In the light of this analysis the results are as follows by country: Luxembourg, Norway, Singapore, and Switzerland, and it has been observed that the variable reduces environmental pollution in all these countries.
The long-run coe cients are analysed under EKC hypothesis, and the coe cient of lngdp is positive while lngdpsq is negative for Canada, Denmark, and Singapore. The ndings reveal that there is an existence of EKC hypothesis between ecological footprint and economic growth with the effect of economic freedom for Canada, Denmark, and Singapore. In other words, as GDP per capita increases in Canada, Denmark and Singapore, environmental degradation will increase accordingly, up to a certain milestone. While GDP per capita continues to rise, once the threshold is exceeded, it will begin to reduce environmental degradation.

Conclusion And Policy Implications
In this study, the effect of economic freedom on environmental degradation is analysed for the 15  Furthermore, the results between ecological footprint and explanatory variables are as follows: Considering the literature, it has been found that the renewable energy consumption reduces the ecological footprint and thus improves environmental sustainability. In this study, these claims are supported in this direction with the results found. Namely, there is a statistically signi cant relationship between ecological footprint and renewable energy consumption for Australia, Denmark, Luxembourg, Norway, Singapore, and Switzerland. According to the coe cients, the variable has a reducing effect on environmental degradation for all these countries.
The economic freedom is statistically signi cant for Canada and Estonia. Some studies have revealed that economic freedom has positive effects on ecological footprint, while others have revealed that it increases the ecological footprint. In this study, it is seen that economic freedom reduces the ecological footprint in Canada. In other words, economic freedom in Canada reduces environmental degradation. On the contrary, in Estonia, ecological freedom increases the country's ecological footprint, namely environmental degradation. In this context, according to American Heritage Foundation, the index of economic freedom is quite high in Estonia. According to Palm (2021), high economic freedom has led to economic success that has earned Estonia a place among the countries with the highest standard of living in the world and has helped it grow rapidly. However, this has led to problems related to environmental protection, such as the protection of various natural assets and the reduction of pollution. It is expected that the Estonian economy will reach a point where the use of natural resources must be adjusted. For this reason, it is recommended to impose restrictions on the use of resources.

Declarations Statements & Declarations
The authors declare that no funds, grants, or other support were received during the preparation of this manuscript. All authors certify that they have no a liations with or involvement in any organization or entity with any nancial interest or non-nancial interest in the subject matter or materials discussed in this manuscript.

Compliance with Ethical Standards
The author states that there is no con ict of interest. Research does not include Human Participants and/or Animals. Informed consent is not included in the study.

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Authors Contributions
The entire study was performed by Çisem Bektur, the only author in the study. Funding