Background:The role of governance and economic structures in the control and management of environmental pollution is of considerable importance. The shadow economy, as part of informal economic activities, can have direct and indirect effects on air, water, and soil quality. In addition, weaknesses in governance indicators, including transparency, accountability, government efficiency, and the rule of law, can exacerbate environmental pollution. This highlights the importance of examining the interaction between the shadow economy and the quality of governance with the environment in Iran, making it one of the crucial research issues in the field of sustainable development and environmental policymaking.
Aim: Given the increasing importance of environmental sustainability and the long-term effects of pollution on human health and the economy, identifying the factors influencing environmental pollution is of particular significance. The shadow economy, as part of informal economic activities, and governance indicators, as measures of the quality of government management and policymaking, can play an important role in determining the level of environmental pollution. Therefore, the present study aims to examine the impact of the shadow economy and governance indicators on environmental pollution in Iran, in order to provide insights for formulating effective environmental policies.
Methodology: To conduct this research, annual time series data from 1991 to 2023 were used and the ARDL method was used.
Findings: The data analysis showed that increases in per capita gross domestic product, trade liberalization, and fossil energy consumption in Iran lead to higher carbon dioxide emissions, and these effects are significant in both the short and long term. In contrast, the government efficiency index had a negative and insignificant effect, while the shadow economy had a positive but insignificant effect on carbon dioxide emissions. Results from the error correction model