Drivers Of CO2 Emissions: Evidence from Banking, Digitalization, and Resource Depletion

This study analyzes the environmental impacts of banking, digitalization, and natural resource depletion in line with sustainable development goals for 94 countries covering the period 2014-2021. For this purpose, index values for banking and digitalization variables were generated using principal component analysis (PCA). Subsequently, econometric analysis was conducted using quantile regression and the IV-2SLS method as a supplementary method, considering the heterogeneous nature of carbon emissions. The findings reveal that digitalization and natural resource depletion increase carbon emissions at every quantile. The increasing carbon emissions impact of digitalization points to a rebound effect, which has recently gained support in the literature. The IV-2SLS findings also support these findings. However, as carbon emissions reach higher quantiles, the effects of digitalization decrease, while the effects of natural resource depletion increase. While banking initially has a reducing effect on carbon emissions, its effect appears to become insignificant as carbon emissions reach higher quantiles. The IV-2SLS findings, however, reveal a negative relationship for the overall panel. This suggests that the banking variable has different effects on carbon emissions for different emission levels. Considering the findings, we contribute to the literature by presenting important policy recommendations that are consistent and complementary to the findings.