Investigating the myth of smokeless industry: environmental sustainability in the ASEAN countries and the role of service sector and renewable energy

Since the development of the service sector and renewable energy reduce fossil-based energy consumption which mitigates CO2 emissions and this nexus provides a better understanding of the environmental sustainability. Considering the substantially increasing contribution of service sector and tremendous potential for renewable energy in ASEAN5 countries, leaning forward from ASEAN's energy and growth nexus, this study examines the impact of service sector contribution and renewable energy on the environmental quality of ASEAN5 using annual data from 1990 to 2018. The results of the fully modified ordinary least squared, dynamic ordinary least squared, and canonical co-integrating regressions depicted that the service sectors of Thailand, the Philippines, and Singapore augment CO2 emissions; however, the service sectors of Malaysia and Indonesia could reduce CO2 emissions. The increasing share of renewable energy can enhance environmental quality, but its magnitude varies in ASEAN5 economies; non-renewable energy, population, and economic development deteriorate the environment. Our results confirm the existence of environmental Kuznets curve in all the ASEAN5; the Gregory-Hansen test confirmed that results are robust. Finally, the Granger causality designated that economic development and non-renewable energy have a significant causal relationship with CO2 emission of ASEAN5 countries. These findings suggest that the ASEAN5 economies need to optimize their economic structure for promoting sustainable development in the long run.Graphical abstract.