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Sustainable Development and Climate Finance in Shaping CO 2 Emissions: A Heterogeneous Panel Analysis Across Economies

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  • Hichem Saidi

    (Department of Economics, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia)

Abstract

This study investigates how climate finance influences CO 2 emissions, emphasizing the pivotal role of sustainable development as a transmission pathway. To account for heterogeneity in economic level, policy frameworks, energy dependence, and environmental governance, the study uses a full sample of 73 countries from 1990 to 2023, and differentiates between 37 OECD and 36 non-OECD countries. Empirical results of both Common Correlated Effects Pooled (CCEP) and Common Correlated Effects Mean Group (CCEMG) estimators show that both climate finance and sustainable development significantly reduce CO 2 emissions. This result is confirmed for both OECD and non-OECD countries. Additionally, renewable energy enhances environmental quality since it significantly lowers CO 2 emissions, while total energy consumption increases it. Finally, the results confirm the Environmental Kuznets Curve (EKC) theory since GDPG increases CO 2 emissions while the GDPG squared decreases it. These findings offer actionable insights for policymakers aiming to enhance the effectiveness of climate finance in fostering sustainable, low-carbon development.

Suggested Citation

  • Hichem Saidi, 2026. "Sustainable Development and Climate Finance in Shaping CO 2 Emissions: A Heterogeneous Panel Analysis Across Economies," Sustainability, MDPI, vol. 18(11), pages 1-21, June.
    • Handle: RePEc:gam:jsusta:v:18:y:2026:i:11:p:5706-:d:1959843
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