On the nexus between energy efficiency, financial inclusion and environment: Evidence from emerging seven economies using novel research methods

Emerging seven (E7) are some of the rising economies in the world and are expected to be economically strengthened in the coming few decades due to rapid economic growth. Besides, financial inclusion and globalization are also rising in these economies, which compel them to adopt energy saving techniques to lower carbon (CO2) emissions in the region. This study aims to explore the influence of these variables on CO2 emissions in E7 economies over the period from 2004 to 2019. Various panel econometric approaches reveal that all the variables are stationary at first difference. Also, the long-run cointegration association exists between them. The non-normal distribution of data leads to the adoption of the panel quantile estimator for the long run estimations across three quantiles (i.e., q0.25, q0.50, and q0.75). The empirical findings illustrate that energy efficiency is negatively associated to CO2 emissions in all the quantiles. However, financial inclusion, economic growth, globalization, and composite risk index are the prominent factors of CO2 emissions. Such factors are the primary reasons for environmental degradation in the region. The estimated panel causality test results confirm the feedback effect for the variables except for globalization, which runs toward CO2 emissions. Based on findings, this study suggests policies regarding the encouragement of energy efficiency and alteration of economic growth from non-renewable energy sources to renewables. Devotion of financial inclusion towards green finance and green bonds promotion and reducing composite risk to promote environmental sustainability.