Unraveling Causal Dynamics: Exploring Resource Efficiency and Biomass Utilization in Malaysia's Context

Industrial activities in Malaysia continue to exert significant environmental pressures, resulting in notable impacts on both its biocapacity and ecological footprint. Policymakers are actively seeking strategies to mitigate this environmental degradation. The Load Capacity Factor (LCF) serves as a comprehensive indicator of environmental deterioration, and an examination of its determinants may offer insights into the effectiveness of these policy measures. As a result, this study investigates the impact of biomass energy, resource efficiency, and economic growth on Malaysia. Additionally, this study assesses the validity of the load capacity curve (LCC) hypothesis. The study employs the ARDL estimator and reveals that biomass energy and resource efficiency positively influence LCF in Malaysia. Furthermore, it confirms the presence of the LCC hypothesis. In addition, the study employs bootstrapped time-varying causality analysis, which observes a bidirectional causality between LCF and its regressors (biomass energy, resource efficiency, and economic growth) in Malaysia. The study underscores the necessity for Malaysian policymakers to support the implementation of the circular economy policies and increase the biomass energy in the country's energy mix.