Are international remittances harmful to the environment in the long term? An empirical study for Latin America

The world faces major challenges in achieving the Sustainable Development Goals (SDGs), particularly those related to climate action and environmental quality. This paper examines the long-run relationship between international remittances and CO2 emissions in 15 Latin American countries over 1995–2020. We employ second-generation panel estimators that are robust to cross-sectional dependence and slope heterogeneity (CCE-MG and AMG), and we validate the results using Driscoll–Kraay standard errors. The estimates indicate that higher remittance inflows are associated with higher per-capita CO2 emissions in the long run: a 1% increase in remittances is linked to a 0.06–0.07% increase in emissions. Economic growth also increases emissions, while renewable energy consumption reduces them. Financial development is not statistically significant in the baseline CCE-MG and AMG models but becomes positive and significant in robustness checks. We additionally implement CS-ARDL as a dynamic robustness check. Overall, the findings suggest that, without complementary policies that steer remittance-financed consumption and investment towards cleaner technologies and energy sources, remittances may unintentionally exacerbate environmental degradation in the region.