The impact of economic and financial development on environmental degradation

Environmental Science and Pollution Research, 2020

This study aimed to examine the impact of financial development and energy consumption on CO 2 emissions by employing balanced panel data from the period 1990-2017 for 184 countries worldwide. This study applied seemingly unrelated regression (SUR), two-step difference, and the system GMM model for data analysis. The examined results of SUR, two-step difference, and system GMM show that energy consumption positively impacts the CO 2 emissions worldwide; on the other hand, the examined results of two-step difference and the system GMM model indicate that financial development helps to reduce the CO 2 emissions and the results of SUR indicate that financial development positively impacts the CO 2 emissions. The examined results regarding economic growth indicate a positive effect on the CO 2 emission and the square of economic growth verifies the validly of the environmental Kuznets curve in 184 countries. This study has significant implications for policy makers with regard to environment improvement, clean energy conservation, and an efficient financial system. Further directions are suggested based on the examined results. Keywords Financial development. Energy consumption. CO 2 emissions. Environmental Kuznets curve. Two-step GMM and two-step system GMM 1 For example, most of the developed and developing countries such as the United States

International Journal of Research -GRANTHAALAYAH

Carbon emissions from the burning of fossil fuels and greenhouse gas emissions induce global warming which is a serious and challenging environmental threat in the contemporary era. By applying time series data and analyzing through econometric techniques, such as unit root tests, bound techniques, ARDL techniques and causality techniques, this article examines the impact of economic growth, financial development, and energy consumption on CO2 emissions over the period 1990 to 2019 in Sri Lanka. According to the study’s conclusions, all variables are cointegrated in the long run. The causality analysis reveals that unidirectional causality runs from environmental degradation to financial development and environmental degradation and energy consumption, whereas bidirectional causality is found between financial development and energy consumption in the long run. Further, the findings revealed that energy consumption and financial development have a statistically significant positive ...

International Journal of Energy Economics and Policy, 2023

This paper aims to examine the relationship between economic growth and environmental degradation in a sample of 28 countries. A panel data model is used dividing the sample into four groups classified by income level where fixed and random individual effects are estimated without the time component using an error-components model (ECM). Annual data from the World Bank for carbon dioxide emissions per capita and gross domestic product per capita are used for the period 1970-2016. The empirical results and their graphical analysis, using a panel data approach with an ECM, suggest an absence of an Environmental Kuznets Curve (EKC) in the whole sample. These results considering panel data with an ECM, 28 countries and 46 years differ from many of the studies that support the existence of an EKC in similar samples.

Environmental Science and Pollution Research, 2019

This study investigates the impact of the human capital index, globalization, and financial development on carbon dioxide of grouping OECD countries using pool mean group estimation technique from 1990 to 2015. This study also applies the secondgeneration cross-sectional augmented Dickey-Fuller and cross-sectional Im, Pesaran, Shin panel (CIPS) unit root, and the latest (Westerlund 2008) cointegration tests for further investigations. The result shows that both the human development index and financial development stimulate environmental improvement by using PMG long-run panel estimation approach. Furthermore, the pairwise Dumitrescu-Hurlin panel causality results prove the two-way causal association between financial development and carbon emissions. The unidirectional causality running from globalization and human development index towards carbon emission is also supported. Based on the aforementioned results, we provide a set of recommendations for policy implication.

Environmental Science and Pollution Research, 2020

Financial development is one of the key drivers of rapid economic growth as well as CO 2 emission in the environment. This study aims to investigate the casual links between financial development and CO 2 emission in G8 and D8 countries for the time period from 1999 to 2013. We used PCA to develop financial development index from its five sub-components. Second-generation panel unit root tests are applied to check the stationary level and to tackle the presence of cross-sectional dependence in panels. The empirical results of PMG-panel ARDL technique show that financial development has significant and positive impact on carbon emission at a 1% statistical level in both panels in the long-run. The impact of financial development and energy consumption is more evident in D 8 and G 8 countries respectively. The energy use and trade openness affect positively while GDP significantly causes to decline the carbon emissions at 1% statistical level. The results of D-H causality test show that majority of the variables have one-way causality towards CO 2 emission in both panels except the financial development and energy use having two-way causality in G8 panel only. The empirical findings of the present study suggest that through improved financial system, more funds should be invested in clean energy projects to adopt the renewable energy, strict monetary policies should be implemented to reduce the consumption of big ticket items, and adoption of measure to reduce trade embodied emission is suggested.

Environmental Science and Pollution Research, 2018

This study aims to analyze the impact of financial development, foreign direct investment, economic growth, electricity consumption, and trade openness on environmental quality for a panel of 59 Belt and Road Initiative (BRI) countries, over the period of 1980-2016. The presence of the environmental Kuznets curve (EKC) hypothesis is investigated. The cross-sectional augmented Dickey-Fuller (CADF) and cross-sectional Im, Pesaran, and Shin panel unit root test; the Westerlund cointegration test, the dynamic seemingly unrelated regression (DSUR) approach; and the Dumitrescu and Hurlin (Econ Model 29:1450-1460, 2012) panel causality approach are employed. It is found that the analyzed variables are stationary at first differences and are cointegrated. It is also found that an increase in financial development, foreign direct investment, and trade openness enhance environmental quality, while the increase in economic growth and electricity consumption degrade environmental quality. The presence of the EKC hypothesis for the selected panel countries is validated. Furthermore, the Dumitrescu-Hurlin (DH) panel causality test result confirmed the presence of bidirectional causality among economic growth, foreign direct investment, financial development, electricity consumption, and trade openness with environmental quality.

International Journal of Sustainable Development & World Ecology

This study explored whether financial development and energy consumption affect environmental sustainability in Organization for Economic Cooperation and Development (OECD) countries. The empirical evidence used in this study was based on the standard fixed effects and the Arellano-Bover/Bundell Bond dynamic panel approach. Our empirical results demonstrated the importance of a financial development index and energy efficiency for reducing carbon emissions and promoting sustainability in the OECD. The mechanism through which financial development affects carbon emissions has been identified as energy consumption and foreign direct investment. Our study recommends that financial development be prioritised alongside investments in energy efficiency to promote environmental sustainability.

Energies, 2019

Several studies have examined the relationship between environmental performance and economic development. However, most of them did not take sustainable development and financial development into account. The study argues that sustainable financial and economic development contributes to reducing greenhouse gas emissions. We use the panel data regression model to capture the relationship between greenhouse gas emission and sustainable economic and financial development. The panel data refers to the period of 2007-2017. The EU 25 countries were analysed. The results show that the relationship between sustainable financial development and environmental degradation is more relevant for converging economies than developed countries. We found that the variable "energy productivity" has the strongest impact on greenhouse gas emissions for both country groups (converging and developed); however, it increases for developed countries and it decreases the greenhouse gas emissions for converging economies. We also found that environmental taxes are an efficient instrument that mitigates greenhouse gas emissions, especially in developed countries group.

2013

This thesis investigates estimates finance induced Environmental Kuznets Curve hypothesis in order to put forward empirical relationship between carbon dioxide emissions and financial development. Annual data ranging from 1960 to 2011 has been employed to both time series and panel setting for developed and developing countries. Results from both time series and panel data analyses suggest that carbon dioxide emissions in developed and developing countries are in long-term equilibrium relationship; trade and finance sectors have long-term significant impact on carbon emissions and therefore carbon emissions converge to their long-term equilibrium levels through the channels of finance and trade sectors. However, speed of adjustment is different across countries and financial expansion is negatively related to carbon emissions. Impulse response analyses prove that finance and trade sectors have negative (reducing) impact on the emissions levels in the case of developed economies while they have positive impact in the case of developing economies. This supports the reality that developed countries are more successful in adapting energy conservation policies than developing countries. Therefore, authorities in developing countries need to adapt conservation policies effectively in order to prevent increases in emissions levels through expansion in financial and trade sectors.

Indian Journal of Applied Economics and Business, 2023

The purpose of this study is to explore the relationship between financial development and carbon dioxide (CO 2) emissions in India from 1960 to 2020. The Vector Error Correction Model (VECM) is used to determine the causal direction. As per the findings of the study, financial development has a significant effect on CO 2 emissions. Moreover, economic development and investment, have a detrimental effect on environmental quality because it releases a significant amount of CO 2 emissions into the environment. Our empirical findings confirmed the presence of an environmental Kuznets curve. The outcomes of the VECM show that the long-run causality can be noticed in CO 2 emissions, financial development, and investment. Furthermore, the validity and reliability of the results were verified by using a variety of diagnostic tests. This research presents novel results that add to the current literature and may be of particular importance to the country's policymakers regarding the financial system and its importance in environmental problems.