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An Investigation of the Dynamic Relationships Between Financial Development, Renewable Energy Use, and CO2 Emissions

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  • Umme Habiba
  • Cao Xinbang

Abstract

Understanding the drivers of CO 2 emissions has been necessary in drafting policies to curb global warming. In this study, we examine the impact of disaggregated financial development components on CO 2 emissions by taking into account the multifaceted and complicated structure of modern financial systems in 46 countries of Sub-Saharan Africa between 1991 and 2016. The empirical models are estimated using a system-GMM approach. The analysis shows that the development of financial markets and their components, including access, depth, and efficiency, contribute to CO 2 emissions in the region. For financial institutions development and its sub-measures, similar effects are observed. However, financial market development has less adverse environmental effects than the development of financial institutions. Renewable energy consumption also leads to substantial reductions in CO 2 emissions. The financial markets are playing an increasingly important role in complementing renewable energy for environmental improvement. The study also indicates that the relationship between these variables and CO 2 emissions varies at a country-level depending on the economy of the country. The study also discusses the policy implications of these findings.

Suggested Citation

  • Umme Habiba & Cao Xinbang, 2022. "An Investigation of the Dynamic Relationships Between Financial Development, Renewable Energy Use, and CO2 Emissions," SAGE Open, , vol. 12(4), pages 21582440221, November.
    • Handle: RePEc:sae:sagope:v:12:y:2022:i:4:p:21582440221134794
    DOI: 10.1177/21582440221134794
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