Does institutional quality affect CO2 emissions? Evidence from explainable artificial intelligence models

Although the debate regarding the impact of high-quality institutional measures to address climate change associated with global carbon dioxide (CO2) emissions has gained increasing attention, there is insufficient quantitative evidence to support this debate. Using data from 136 countries between 1996 and 2016, we provide unique and compelling evidence that transcendent institutional measures and conscious government policies for environmentally sound and sustainable economic growth can effectively reduce CO2 emissions. Our research reveals that effective climate change policies must be associated with improvement in at least three main institutional dimensions: protection of property rights (the rule of law), citizens' participation in elections and freedom of expression (voice), and control of corruption. Climate-friendly economic policies must consider improving such institutional features while simultaneously advancing economic development, increasing the use of renewable energy by private and public entities, and significantly reducing the consumption of fossil fuels.