In recent times, environmental sustainability has emerged as one of the most demanding concerns of the 21st century, due to continuous expansion of global economic activities (Ibrahim et al., 2023; Wang et al., 2022). However, rapid economic development and reliance on non-renewable energy sources have led to significant environmental concerns, including climate change, biodiversity loss, and greenhouse gas emissions (Awosusi et al., 2023; Destek and Aslan., 2017). Recognizing the urgency of transition to cleaner energy sources, reduce carbon footprints, and achieve sustainable development goals, nations worldwide have come together under critical international agreements, for example, Kyoto Protocol 1997, followed by the landmark Paris Agreement 2015, aims to keep the global average temperature well below 2°C above pre-industrial levels, with efforts directed at limiting the increase to 1.5°C (Alper et al., 2022; Awosusi et al., 2023; Jie et al., 2023). Additionally, the annual Conferences of the Parties (COP) under the United Nations Framework Convention on Climate Change (UNFCCC) have provided a platform for countries to negotiate and collaborate on climate strategies, the recent conference COP28 held in Dubai, signalled a significant milestone in transition away from fossil fuels, highlighted the need for a swift, equitable, and equitable transition, supported by substantial emissions reductions and enhanced financial mechanisms, ensuring to maintain the global temperature within the 1.5° threshold.

In the era of climate change, coal stands out as the most cost-effective and abundant fossil fuel globally, catalysing global development, electricity generation and poverty alleviation (Kanat et al., 2022). In emerging economies, coal remains a significant energy resource, fuelling rapid industrial expansion and urbanization, primarily due to its substantial reserves, lower prices, affordability, and reliability in providing consistent energy (Chang et al., 2017). These factors have positioned coal as a preferred fossil energy source for many countries seeking to meet their energy demand (Al-mulali & CheSab, 2018). In contrast, developed nations towards shifting towards cleaner energy alternatives, have make it a cornerstone for energy security through coal efficiency (Awosusi et al., 2024), action to cut methane emissions from coal mines and carbon capture storage (CCS) technologies (Li, 2023a; Li, 2023b). However, coal contributes to severe environmental challenges through greenhouse gas emissions, exacerbating climate change. Coal accounts for approximately 15.5 GH of global carbon emissions due to increase in global coal-fired power generation by 2%, leading to record-high CO₂ emissions from coal-fired plants (International Energy Agency 2022). Consequently, the combustion of fossil fuels, especially in the form of coal, has resulted in significant environmental degradation and deterioration, posing an urgent climate challenge and negative health effects on humans (Li et al., 2022), ultimately resulting in higher healthcare costs (Chang et al., 2017). Moreover, as economies grow and industries flourish, the demand for coal energy, natural resources, and land increases, thereby decreases the environment quality (Hassan et al., 2019; Kim and Yoo., 2016; Tauseef et al., 2019).

The ecological footprint, as a critical measure for assessing the environmental impact of human activities on the planet (both productive land and sea areas used for consumption and production) (Wackernagel and Rees, 1998), thus provides a holistic approach on the pressure humans exert on the planet. The ecological footprint offers a comprehensive measure of environmental sustainability than traditional measure, i.e., carbon emission, by integrating various dimensions of human impact, such as carbon emissions, resource consumption, and land use (Wang et al., 2022). The rapid increase in domestic and industrial production, resource utilization, and energy consumption in developing countries has accelerated ecological footprints (Wang et al., 2022). As a result, energy consumption, vital for economic growth intensifies resource exploitation, leading to higher fossil fuel use and CO₂ emissions, thus reduces the environmental quality (Majeed et al., 2021). This paradox of economic dependence on coal and the need for ecological sustainability has stimulated a critical discourse on the trade-offs between coal consumption, ecological footprints, and economic growth, in order to design and implement robust policies that facilitate the transition from fossil fuels and promote long-term environmental sustainability.

Against this backdrop, this paper primarily aims to evaluate the impact of coal consumption and ecological footprint on economic growth in the top 17 coal consumption countries. Previous studies (e.g., Danish et al., 2018; Kongkuah et al., 2021) have used the conventional proxy for environmental degradation, i.e., carbon dioxide (CO₂) emissions. However, CO₂ does not encompass the multi-dimensional aspects of environmental quality (Altıntaş and Kassouri, 2020; Dogan et al., 2020). Therefore, this paper uses the ecological footprint (EF) as a proxy for environmental quality, introduced by Wackernagel and Rees (1998) to address the limitations of CO₂ emissions. The ecological footprint (EF) measures the environmental adversities concerning bio-productive land area, which is used by humans for their diversified desires and adjusts the wastes generated by humans in the process (Rees, 2000). We employed the Fully Modified OLS, Dynamic OLS, and three-stage least squares (3SLS) to achieve the study’s objectives.

The contributions of the study are fourfold. Our study is among the recent studies that established an asymmetric relationship between environment and growth, which supports the conditional EKC hypothesis. Our findings reveal that the relationships between coal consumption, ecological footprint, and economic growth across coal countries vary significantly depending on their levels of development and ecological stratifications. We find that coal and ecological footprint significantly promote economic growth in developing and ecologically deficit countries, while developed and ecologically surplus countries experience significant negative impacts. This suggests new insights in energy literature that the turning point of the EKC hypothesis differs following a country’s income level and resource capacity. Methodologically, our paper integrates ecological surplus and deficit classifications into the analysis of energy-growth-environment dynamics by offering a more sustainability-aligned framework, beyond the traditional standard GDP-based classifications. Thus, our findings encourage the need for localized policy insights.

Second, our study contributes to the growth hypothesis, particularly in ecologically deficient countries where coal consumption and ecological footprint drive growth. Unlike most prior studies (Apergis and Payne, 2010; Jia et al., 2022; Jim and Kim, 2018), our findings establish that despite global energy transition discourse and policy narratives, coal consumption remains a significant growth determinant for lower-income or developing economies. Similarly, we find strong support for the EKC hypothesis across developmental stages, with GDP and GDP square having both positive and negative effects on coal consumption, respectively. Therefore, our findings add theoretical robustness to the integration of growth and EKC hypotheses. Third, in contrast to studies that assume the energy-growth relationship as unidirectional causality, we treat the coal-growth models as jointly determined systems using three-stage least squares (3SLS), which account for endogeneity, simultaneous causality, and feedback effects. For instance, coal consumption and ecological footprint significantly impact GDP, while GDP and ecological footprint significantly impact coal consumption, which reinforces the presence of two-way causality.

Third, unlike previous studies (Chang et al., 2017; Salahuddin et al., 2018) that have relied on Granger causality tests to understand the causal relationship between variables despite it being an insufficient measure of economic causality (Malik, 2021), we employ the simultaneous equation modelling approach using the three stages least square (3SLS) proposed by Zellner (1992). This approach allows for interdependence between regressors and regressand (Malik, 2021), and provides consistent, reliable and unbiased results by solving the correlation between unobserved error and regression terms (Ren et al., 2021). This paper incorporates relevant explanatory variables in every equation of 3SLS to overcome the problem of omitted variable bias. Unlike past studies that used Granger causality to find a unidirectional relationship between coal and economic growth and support for the neutrality and feedback hypotheses (Chang et al., 2017; Lin et al., 2018), our study in the use of the 3SLS finds a bidirectional negative relationship between coal consumption and economic growth. Also, we find directional positive relationships between coal consumption and ecological footprint and between ecological footprint and economic growth at the 1% level. Our findings of the ecological footprint model using 3SLS confirm the EKC hypothesis in developed countries while it is not confirmed in developing and ecological surplus countries, suggesting that environmental quality starts to improve at the same time as economic growth (Pata, 2018), due to increasing level of environmental awareness, stringent environmental regulations and the transition to low-carbon production technologies (Anoruo, 2017).

Lastly, by conducting sub-sample analysis, this study provides insights into the divergent effects of different ecological typologies (i.e., ecological deficit and ecological surplus) on economic growth by analysing data from the global ecological footprint. Countries with ecological surpluses may enjoy favourable economic growth as a result of sustainable resource management, whereas ecological deficit countries are confronted by the challenges and possible risks of resource depletion and environmental degradation. Our findings show that in ecological deficit countries, both coal consumption and ecological footprint have a positive and significant impact on economic growth. Conversely, in ecological surplus countries, coal consumption exerts a positive but insignificant influence on economic growth, while ecological footprint exhibits a positive and significant impact on economic growth. This subsample analysis provides policymakers and stakeholders with insights for formulating sustainable development strategies, fostering responsible environmental behaviour, as well as achieving an equilibrium approach to growth in the economy that incorporates ecological considerations into account.

The remainder of the paper is organised as follows. The literature review section provides a related literature review. The “Data and Methodology” section offers the data and econometric methodology. The “Empirical Results section present the empirical results. The last section provides “Discussion and Conclusion.

The present study uses annual data on the gross domestic product (US dollar) as a measure of economic growth sourced from World Bank Development Indicators (WDI). Coal consumption (Exajoules) is sourced from the British Petroleum statistical review of world energy. The ecological footprint is measured in global hectares (per capita) from the Global Footprint Network as used in past studies (Ahmed et al., 2020; Al-mulali and Che Sab, 2018; Bildirici and Bakirtas, 2014). The period from 1980 to 2022 was selected due to the availability of consistent data on coal consumption, ecological footprint, and economic growth for the selected sample and post-2015 data exhibit inconsistencies, making it less reliable for analysis. Further, the pre-2015 period is essential for understanding coal consumption trends, particularly in coal-dependent nations, highlighting its impact on economic growth and environmental degradation. This era includes key international agreements like the Kyoto Protocol, which had limited success in reducing coal use. Analysing this period offers an understanding into the effectiveness of early climate policies and provides a baseline for evaluating the environmental cost of coal consumption, crucial for assessing the potential success of post-2015 initiatives such as the Paris Agreement, COP meetings. Additionally, the selection of top seventeen coal consuming countries (Australia, Denmark, Germany, Japan, New Zealand, South Korea, Sweden, the United Kingdom, and the United States, Brazil, China, India, Indonesia, Malaysia, South Africa, Thailand, and Turkey) are taken into consideration, primarily on the highest coal consumers based on world meters database and International energy agency (IEA, 2021). Further, as per report of the IEA (2024), global coal demand reached a record 8,687 Mt, a 2.5% year-over-year increase, driven by countries like China, Australia, India, and the United States, which rely heavily on coal for industrial and economic growth. Despite being major coal consumers and contributors to carbon emissions, these countries are active participants in global climate initiatives, such as the Paris Agreement (2015), highlighting a paradox between their commitments to climate action and continued coal dependency. This study explores the complexities of this duality, seeking to uncover how these countries are making economic development at the cost of environmental degradation. As a general norm, we sourced data on some control variables including financial development, energy consumption, population, urbanisation, foreign direct investment, and trade openness from the World Bank Development Indicators (WDI) database. The inclusion of control variables is to avoid omitted variable bias and to provide more accurate estimates of the parameters in the model specification.

The description of the variables is presented in Table 1. In most of the growth and environmental nexus research, CO₂ emissions are used as an indicator of environmental degradation (Al-Mulali et al., 2015). However, we provided a more reliable and preferred indicator of environmental degradation by using ecological footprint as suggested in environmental policy literature (Ahmed et al., 2019; Ulucak and Bilgili, 2018). In contrast to CO₂ emissions as a measure of environmental degradation, ecological footprint measures the overall consequence of anthropogenic activities, i.e., grazing of land, ocean, croplands, forest products, infrastructure and carbon footprint on the ecosystem (Ahmed et al., 2019; Charfeddine and Mrabet, 2017).

To investigate the long-run relationship between coal consumption, ecological footprint, and economic growth in the top coal-consuming countries, this study employs both Dynamic Ordinary Least Squares (DOLS) and Fully Modified Ordinary Least Squares (FMOLS) methods to ensure robust and reliable estimation results. Firstly, Hardi Z-stat, Phillips-Perron test and ADF- Fisher unit root tests are applied to examine the stationarity properties of the data and followed by Kao (1999), Pedroni (1999) and Westerlund (2007) co-integration test to determine the existence of a long-run equilibrium relationship among the variables. Further, to estimate the long-run impacts of the determinants on each variable, the study employed both Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) techniques. Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) are employed to estimate the long-run relationship among the co-integrating variables and eliminates the presence of endogeneity and serial correlation (Khan et al., 2019). FMOLS developed by Phillips and Hansen (1990) corrects endogeneity and serial correlation non-parametrically by adjusting the OLS estimator. DOLS developed by Stock and Watson (1993), on the other hand, is a parametric approach used to provide optimal estimates of co-integrating regression and addresses endogeneity and serial correlation by including leads and lags of the first differences of the independent variables. Both FMOLS and DOLS solve the problem of endogeneity and eliminate small sample bias (Hardi et al., 2023), thus ensures more accurate and robust estimation of the co-integrating vectors (Fatima et al., 2024). The empirical model representing the long-run relationships among these interconnections as variables is given in Equation 1 as follows: l n G D P i t = a 0 + a 1 l n C o a l i t + a 2 l n E F i t + a 3 ln ⁡ F D i t + a 4 ln ⁡ P o p i t + a 5 l n T r a d e o p e n i t + u i t … (1)

Where i represents the number of cross-sectional (example 1,2,3,4 … … … … … … N) and t denotes the period (1980–2022). lnGDP represents economic growth, a 0 represents the slope intercept; a 1 , a 2 , a 3 , a 4 a 5 represents the coefficients estimated for Coal, ecological footprint, financial development, population, and trade openness. While, u i t denotes the error correction term. In addition to the FMOLS estimator, we employed the three-stage equation model (3SLS). The 3SLS estimates not only are robust and asymptotically normal than single equation estimation but allows correlation among unobserved error term across different equations (Bakhsh et al., 2017). The 3SLS provides an alternative to Granger causality that has the limitation of insufficient prediction of economic causality (Malik, 2021). The Equations 2–4 for the 3SLS are presented below:

Growth equation: l n G D P i t = a 0 + a 1 l n C o a l i t + a 2 l n E F i t + a 3 ⁡ ln ⁡ P o p i t + a 4 l n T r a d e o p e n i t + u i t … (2)

Coal consumption equation: l n C o a l i t = b 0 + b 1 l n G D P i t + b 2 l n E F i t + b 3 l n P o p i t + b 4 l n T r a d e o p e n i t + δ i t … (3)

Ecological footprint equation: ln ⁡ E F i t = c 0 + c 1 ⁡ ln ⁡ G D P i t + c 2 l n G D P s q u a r e i t + c 3 l n C o a l i t + c 4 ⁡ ln ⁡ U r b a n i s a t i o n i t + c 5 l n F D I i t + θ i t … (4) where, a, b, and c are the coefficients used for regression representing the explanatory variables in the three-stage least square (3SLS) model. “i” represents the countries, and “t” is the year vector and u i t , δ i t , θ i t are disturbance terms.

For further analysis encouraged by Ren et al. (2021), we separate our whole panel of 17 countries into developing (Brazil, China, India, Indonesia, Malaysia, South Africa, Thailand, and Turkey) and developed countries (Australia, Denmark, Germany, Japan, New Zealand, South Korea, Sweden, the United Kingdom, and the United States) as shown in Table 2 and reconfirm the DOLS and FMOLS and 3SLS estimation process in between developed and developing counties. Also, the full sample was grouped into ecologically deficit CC and ecologically surplus CC as depicted in Table 2.

This study investigated the impact of ecological foot and coal consumption on economic growth, using a panel of the top seventeen coal consumption countries. The tests and results are discoursed as follows.

This study investigated the relationship between economic growth (real GDP), coal consumption, and ecological footprint for 17 coal-based countries between 1980 and 2022. The findings of this study are summarized as follows: First, by looking at the results of unit root tests of Phillips-Perron test and ADF-Fisher, variables are stationary both at their level and first differences. Furthermore, the results of Hardi Z-stat represent that the null hypothesis of non-stationarity for whole panel variables can be rejected at levels I (0) and for some variables at first difference I (1), whereas Breitung t-stat shows the analysed variables are stationary at first differences. Second, the results for the Kao (1999), Pedroni (1999) and Westerlund (2007) panel cointegration test confirmed that the variables (economic growth, coal consumption, and ecological footprint) are cointegrated and hence possess a structural long-run relationship.

Third, results from FMOLS and DOLS estimators reveal significant positive relationships between coal consumption, ecological footprint and economic growth in developing and ecologically deficient countries. The results align with the findings of (Adebayo et al., 2023; Ding et al., 2023; Jin and Kim’s 2018; Kanat et al., 2022; Alper et al., 2022; Arshad et al., 2022; Benjamin and Olusegun, 2020; Hassan et al., 2019), emphasizing that developing countries prioritize industrialization and economic growth, often relying on coal due to its affordability and accessibility. This fossil fuel reliance results in significant environmental costs, which outweigh the economic benefits due to excessive or inefficient coal consumption, highlighting the environmental cost of energy-driven growth. In addition, economic growth drives higher consumption of energy and natural resources, leading to environmental degradation. Further, the usage of outdated technologies exacerbates this by increasing energy intensity and environmental harm (Wang et al., 2019).

Thirdly, the results of three-stage least square (3SLS) showed that coal consumption have a significant negative impact on the economic growth for all samples (Full, developed and developing) but positive for both ecological surplus and deficit countries. Similarly, for all samples (full, developed, developing ecological surplus and deficit countries), the ecological footprint has also a significant positive impact on economic growth, highlighting the extreme natural resources consumption, industrialisation, and infrastructure for rapid economic development, as such continued efforts and checks and balances must be in place to ensure institutionalized environmental quality policies and initiatives in coal-based countries. Further, for (Full, developed, developing and ecological surplus countries, the results of the influence of economic growth and ecological footprint on coal consumption revealed that economic growth has a significant negative influence on coal consumption but a positive impact on coal consumption for ecological deficit countries. This is accredited due to the reason that countries may have reached the stage where rates of savings are higher as compared to the rate of consumption. These accumulated funds have been used for energy-efficient technologies and to develop high technological industries. Also, learning from past experiences, these countries may have shifted from fossil fuel to renewable energy consumption or have implemented energy-efficient technologies to curb environmental damage. The results are consistent with Acheampong (2018) in the case of 116 countries, and Khan et al. (2019) in the case of 193 countries. However, ecological footprint coefficients are positive and significant, i.e., has a positive impact on coal consumption. This is attributed due to the reason that environmental deterioration through emission, ecological footprint, etc., are direct penalties for inefficient fossil fuel energy. These results are confirmed by Dong et al. (2019) for 128 countries across the globe.

In addition, the impact of economic growth and coal consumption on ecological footprints discloses that both economic growth and coal consumption have a significant positive impact on ecological footprint, implying that these countries are fossil-dependent countries. These results are justified by the reason that current renewable energy demands are still lower than required for these countries. Therefore, the rest of the energy demand is met by fossil energy resources for economic development. Further, these countries may lack the technologies that assist in the transition to renewable energy. The results are in line with Shahzad et al. (2021) in the case of the United States, Chen et al. (2019) in 16 CEE countries and Awosusi et al. (2023) in case of Japan., Adebayo et al. (2021a) in South Africa. However, the results are in contrast with Somoye and Ayobamiji (2024), who found that energy consumption and economic growrh are crucial driver of environmental sustainability. Furthermore, except for developed countries, it rejects the EKC hypothesis, i.e., an increase in economic growth increases ecological footprint up to a certain time, then finally declines. This is due to the reason that developing countries are still at the stage of development, there is a lack of energy-efficient technologies and proper environmental laws and regulations, these can protect the environment degradation. However, developed countries have strong environmental regulations, technological innovation and research which assist them to restrict the ecological footprint. The results are in line with Altıntaş and Kassouri (2020) in the case of ten European economies, Ren et al. (2021) with and Khan et al. (2019) in 193 countries.

This study provides an in-depth analysis of the nexus between energy-led growth and environment-led growth in top coal consuming countries. The results demonstrate that both coal consumption and ecological footprint are crucial drivers of economic growth in top coal-consuming countries. Hence, to accelerate economic growth, continued reliance on fossil fuels like coal, exacerbates environmental degradation in these countries. The study suggests that to align with the objectives of COP-28, focussed in transition away from fossil fuels and ensuring to maintain the global temperature within the 1.50 threshold, policymakers should focus on a gradual yet decisive transition from coal to renewable energy to address the environmental impacts of fossil fuel dependency, efforts must be intensified to boost the proportion of renewable energy in the overall energy mix. The concerned government should offer incentives for renewable energy infrastructure, green and renewable energy initiatives, investing in research and sustainable development, and removing regulatory hindrances. Additionally, policies that promote energy efficiency should integrate advanced energy-saving technologies, conducting public awareness campaigns, and enforcing stringent energy efficiency standards, enabling the continued use of conventional energy sources, including coal, in a more sustainable manner. Also, stakeholders must prioritize funding and intensify research and development efforts in cleaner coal technologies and carbon capture and storage (CCS) to shift towards more sustainable energy sources. Furthermore, stricter environmental regulations should be enforced to limit the adverse impacts of fossil fuel consumption. To ensure environmental quality, the respective governments should enforce penalties for non-compliance, emissions reduction targets, monitor pollution levels, promoting energy efficiency in industrial processes.

This study faces data availability limitation across the top seventeen coal-consuming countries. Additionally, geographical, and cultural differences among the countries may limit the generalizability of the results. Future research should incorporate additional variables such as technological innovation, energy policy, and energy efficiency to reduce pollution further and enhance sustainable growth. Additionally, future studies should conduct cross-region comparisons based on low and high coal consumption or those transitioning to renewable energy, allowing for tailored policy interventions. The empirical findings highlight the necessity of adopting a comprehensive energy policy that balances economic growth with environmental sustainability. To achieve sustainable development, coal-consuming countries should focus on accelerating the transition to renewable energy, improving energy efficiency, and enforcing strong environmental regulations. These measures can lead to enhanced quality of life for citizens while supporting long-term economic stability. The insights from this research provide crucial guidance for policymakers and stakeholders dedicated to fostering a sustainable energy future in coal-dependent nations.