Exploring the nonlinear and dynamic effects of economic growth, urbanization and renewables on Finland’s ecological footprint using ARDL and KRLS

Purpose: This study examines the dynamic and nonlinear effects of economic growth, urbanization, and renewable energy consumption on Finland’s ecological footprint from 1990 to 2022. Using DARDL and KRLS models, it analyzes short- and long-term relationships, testing the Environmental Kuznets Curve hypothesis and assessing renewable energy’s role in reducing ecological impact. The findings offer policy insights for sustainable development. Design/methodology/approach: This research applies the Dynamic Autoregressive Distributed Lag (DARDL) model to analyze the effects of Gross Domestic Product (GDP), urbanization (URB), and RES-based consumption (REN) on Finland’s EF from both short- and long-term perspectives for the timeframe 1990–2022. Additionally, the Kernel-Based Regularized Least Squares (KRLS) model is employed to capture nonlinear relationships between the variables. Findings: The DARDL model shows a strong correction toward long-term equilibrium, with an Error Correction Term (ECT) of −0.89, indicating that 89% of deviations from the EF are corrected each period. GDP growth follows the Environmental Kuznets Curve (EKC) pattern, with a negative long-term impact but a positive effect from lagged squared GDP, implying that environmental degradation decreases after GDP reaches a turning point. REN reduces the EF both in the short and long term, with significant coefficients. Originality/value: To complement the DARDL analysis, the KRLS model is employed, offering a flexible, nonparametric framework capable of identifying nonlinear relationships and interactions that traditional econometric models might overlook. This dual-method approach provides a robust analysis of both short- and long-term effects of economic and environmental variables on Finland’s EF. It suggests a pathway for further exploration of complex relationships in environmental studies. Our research offers actionable insights for policymakers seeking to balance economic growth with environmental sustainability. The results show positive marginal effects of GDP and GDP² on EF, a negative effect of urbanization, and renewables’ contribution to reducing the EF. The Breitung and Candelon causality test further supports these findings, highlighting significant long-term causality from GDP, URB and REN to the EF.