Financial development and its moderating role in environmental Kuznets curve: evidence from Pakistan

Spillover impacts of financial development and globalization on environmental quality in ASEAN countries

In the globalization era, the economic policy of a specific country might be influenced by the development of neighboring countries. Thus, this study aims to probe the direct and spillover effects of financial development, economic growth, and globalization on environmental sustainability in ASEAN countries during the period of 1992-2021. By applying three spatial regression models, the results are summarized: (1) There are positive spillover effects of financial development in neighboring countries on ecological footprint in a particular country; (2) Economic growth has a positive impact on ecological deficits in both the host country and neighboring countries in the short-run; (3) The expansion of globalization in neighboring countries has a negative spillover effect on the ecological footprint in a particular country and vice versa. Based on these findings, the study recommends that when a country formulates its economic policies, it is necessary to calculate the impact of that policy on neighboring countries and vice versa. Encouraging economic growth and expanding the money supply ought to go hand in hand with fostering greater integration. This integration is essential to counterbalance the potential adverse effects of these macroeconomic variables on environmental quality and ecological balance.

The impact of cross-regional social and ecological interactions on ecosystem service synergies

Increasing socioecological systems (SESs) sustainability requires establishing a reasonable cross-regional social and ecological interaction. In this study, we examine how cross-regional ecological and social interactions affect synergistic effects. Using InVEST and correlation analysis with data from 2010 through 2020, we assessed ESs (i.e., water retention-WR, nutrient retention-NR, and carbon storage-CS) in the Beijing-Tianjin-Hebei (BTH) region. A small watershed, a river network, and settlement development capacity are used to delineate ecological and social interactions units. Based on a Bayesian network model that considers population, economy, and spatial agglomeration patterns between social units, we assessed the potential for achieving a synergistic improvement of ESs and the driving forces behind them. The results show that ESs in the BTH region compete, only a small percentage (6.38%) shows synergetic improvement across CS, WR, and NR. It is beneficial for upstream watersheds to retain water and nutrients, but to maintain carbon storage they may sacrifice water retention. Upstream areas with less development and higher vegetation density have better ecosystem integrity of up- and down-stream watersheds, and can be enhanced with minimal human impact, as social interactions and settlement spatial structures influence ES synergies. There is a higher risk for ecological issues in downstream areas, but greater awareness and collaboration can lead to better ES synergies.

How does financial development reduce carbon emissions: evidence from BRI countries

Low-carbon development in BRI countries is crucial to the global response to climate change. As an important factor in promoting economic growth, financial development has a great impact on BRI countries' carbon emissions. This paper applies the panel data of 43 BRI countries for the period 1997-2019 to investigate the influence of financial development on carbon emissions. The two-tier stochastic Frontier model is employed to decompose the restraining and rebounding effects of financial development. The results show that financial development has both restraining and rebounding effects on carbon emissions, and the rebounding effect is less than the restraining effect, resulting in a positive net effect. The average restraining effect is 0.165, and the average rebounding effect is 0.018, causing the net effect of financial development on carbon emissions to have an average value of 0.147. The restraining effect decreases year by year, implying there is a blocking point to release the restraining effect. Moreover, technological progress strengthens the restraining effect, while the increase in energy consumption weakens the restraining effect. The findings indicate that excavating the restraining effect of financial development, promoting technological progress, and reducing fossil energy consumption is crucial to promoting the low-carbon development of BRI countries.

Analysing the influence of foreign direct investment and urbanization on the development of private financial system and its ecological footprint

In this research, the objective is to examine how private financial development, urbanization and foreign direct investment and economic growth affects the environment using the ecological footprint as an indicator. Panel data was used for 100 countries from 1980 to 2019, classified according to their income level. Several econometric steps were used to estimate the results, such as cointegration and causality techniques. The results show that the private financial system and environmental degradation have a long-term equilibrium relationship, and the incidence is positive, but not significant at the level of the 100 countries. In high-income countries, the private financial system reduces environmental degradation; however, in upper middle-income, lower middle-income and low-income countries, it increases in the long run. Likewise, urbanization plays a predominant role on the ecological footprint in the long term. Meanwhile, the role of foreign direct investment is not stable over time. The causality test shows bidirectional causality between environmental degradation and the private financial system at the global level in high- and upper middle-income countries. However, low-income countries have a unidirectional relationship of environmental degradation to the private financial system. With regard to foreign direct investment, there is a unidirectional causal relationship between environmental degradation and foreign direct investment at the global level and from foreign direct investment to environmental degradation in high-income countries.

Exploring renewable energy, financial development, environmental quality, and economic growth nexus: new evidence from composite indices for environmental quality and financial development

The association between trade, financial development, consumption of renewable energy, environmental quality, foreign direct investment, and economic growth is important for sustainable growth and environmental strategies. Hence, this research unveils this association in selected low- and high-income economies from 1996 to 2020. Unlike most of the previous literature, this study uses a composite environmental quality index, a composite financial development index, and a composite trade share measure to better represent environmental quality, financial development, and trade openness, respectively. The Continuously Updated Fully Modified and Continuously Updated Bias Corrected estimators along with the Dumitrescu Hurlin causality method are utilized to scrutinize the nature of the linkage between the modeled variables. The long-run estimation provided that consumption of renewable energy and environmental quality augment economic growth in high-income nations, while both these variables do not contribute to the economic growth in low-income countries. Financial development upsurges economic growth in high- as well as low-income nations. Interestingly, trade openness boosts economic growth in high-income countries, while in low-income countries, it obstructs economic growth. In causal linkage, the conservation hypothesis for low-income countries and the feedback hypothesis for high-income countries are confirmed in the context of consumption of renewable energy and economic growth association. The supply-leading hypothesis for low-income countries and the feedback hypothesis for high-income countries are supported regarding the financial development-economic growth nexus. Moreover, one-way causality from growth to environmental quality and bidirectional causality between environmental quality and economic growth for low- and high-income countries are established, respectively. Lastly, exhaustive environmental and economic policies are directed.

The impact of fiscal decentralization, green energy, and economic policy uncertainty on sustainable environment: a new perspective from ecological footprint in five OECD countries

The paper explores the short-run and long-run asymmetric impact of fiscal decentralization, green energy, and economic policy uncertainty on environmental sustainability proxied by ecological footprint. Using the Nonlinear Autoregressive Distributed lag (NARDL) approach in selected five OECD countries, we find that ecological footprint responds to positive and negative fiscal decentralization asymmetrically in the long run and short run. However, the nature of the response varies significantly across countries. The result also suggests that green energy is a major factor in reducing the ecological footprint in all countries except Canada. Finally, economic policy uncertainty plays a negative and significant role in the ecological footprint in the UK, USA, and Germany while insignificant in Australia and Canada. Implications for effective environmental policies are discussed.

Environmental Kuznets curve for CO2 emissions in Baltic countries: an empirical investigation

Recognizing the factors responsible for the gradual increase in greenhouse gas [e.g. carbon dioxide (CO2)] emissions is crucial to reduce the detrimental consequences on environmental sustainability and human life. Accordingly, spotting the sectors which contribute the most to CO2 emissions and dampen economic growth have become one of the major concerns for policymakers around the globe. Against this background, this paper examines the nexus between economic growth and CO2 emissions in three Baltic countries namely Estonia, Latvia and Lithuania. Thus, the study basically checks the validity of the environmental Kuznets curve (EKC) hypothesis by taking into account the role of energy consumption and financial development over the period of 1990-2018. This type of study is highly important for the region in order to comply with the commitments of the Paris Agreement and Sustainable Development Goals of the United Nations. The study first employs appropriate testing procedures and second-generation panel data methods to account for cross-sectional dependency and slope heterogeneity among countries. Applying unit roots and cointegration tests, the study then employed different mean group estimation models and heterogeneous panel causality methods suitable for cross-sectionally dependent and heterogeneous panels. The results of the econometric analyses reveal that the inverted U-shaped EKC hypothesis does not hold in the Baltic countries. But the pollution haven hypothesis is evidenced to hold for these nations. By boosting the CO2 emissions figures, again, the study also revealed that higher levels of energy consumption exhibit adverse environmental consequences. Financial development is found to be effective in explaining the variations in the CO2 emission figures of the selected countries as well. Causality test results confirm bi-directional causality between economic growth and CO2 emissions, energy use and CO2 emissions, CO2 emissions and financial development, energy use and economic growth as well as between energy use and financial development. Furthermore, country-specific impacts are found to be similar to the corresponding panel estimates. Consistent with the findings, the study finally puts forward some policy-level suggestions. Accordingly, it is recommended that the Baltic countries need to move away from fossil-fuel dependent energy consumption growth policies to mitigate environmental degradation.

Innovative Carbon Mitigation Techniques to Achieve Environmental Sustainability Agenda: Evidence from a Panel of 21 Selected R&D Economies

Technological innovation in the energy sector is highly needed to reduce carbon emission costs, which requires knowledge spillovers, financial development, and carbon pricing to achieve a green developmental agenda. The current study examines the role of knowledge innovations in achieving the environmental sustainability agenda under financial development and carbon pricing in a panel of 21 selected R&D economies from 1990 to 2018. The study constructed a composite index of financial development and knowledge innovation in the carbon pricing model. The results show that carbon pricing, a financial development index, innovation index, and energy demand fail to achieve stringent carbon reduction targets. A U-shaped relationship is found between carbon emissions and per capita income in the absence of a financial development index and trade openness. At the same time, this study shows the monotonic decreasing function in the presence of all factors. The causality estimates confirmed the feedback relationship between carbon pricing and carbon emissions, carbon pricing and the financial index, and the financial development index and innovation index. Further, the causality results established the carbon-led financial development and innovation, growth-led carbon emissions, and trade-led emissions, pricing, and financial development in a panel of selected countries. The estimates of the innovation accounting matrix (forecasting mechanism) confirmed the viability of the environmental sustainability agenda through carbon pricing, knowledge innovation, and financial development over a time horizon. However, these factors are not achievable carbon reduction targets in a given period. The study concludes that carbon pricing may provide a basis for achieving an environmental sustainability agenda through market-based innovations, green financing options, and improved energy resources. This would ultimately help desensitize carbon emissions across countries.

Does agricultural value-added induce environmental degradation? Evidence from Azerbaijan

This study empirically analyzes the long-term relationship between agricultural production and carbon dioxide (CO₂) emissions in Azerbaijan using annual data covering the period of 1992-2014. Additionally, real income and energy consumption variables were included in the model in testing the existence of the environmental Kuznets curve (EKC) hypothesis. Autoregressive distributed lag (ARDL) method is undertaken to reveal the existence of the long-term relationship between the CO₂ and its determinants. The ARDL mechanism shows that gross domestic product (GDP) and energy consumption have a positive and statistically significant effect on carbon dioxide emissions. However, agricultural production and the square of GDP have a negative impact on air pollution. Furthermore, when the coefficients of real GDP and squared GDP included in the model were examined to analyze the inverted-U-shaped relationship between economic growth and environmental pollution, the EKC hypothesis was confirmed to be valid. According to Toda-Yamamoto causality test results, there is a bidirectional relationship between GDP, the square of GDP, and carbon emissions. From energy consumption and agricultural value-added to CO₂ emissions, a unidirectional Granger causality relationship was found. Ultimately, the findings suggest that policies and reforms that increase or support agricultural production will help lower the country's CO₂ emissions level.

Asymmetric effects of energy consumption and economic growth on ecological footprint: new evidence from Pakistan

This study explores the asymmetric effects of both aggregate and disaggregate forms of energy consumption along with economic growth on environmental quality for Pakistan covering the period from 1971 to 2014. We have employed unit root test with breaks for stationary checks, BDS test for nonlinearity check and nonlinear autoregressive distributed lag (NARDL) approach for assessing the asymmetric co-integrating relationships among the variables by decomposing them into positive and negative shocks. The empirical findings for aggregate consumption reveal that only negative shocks have a significant impact on ecological footprint. Similarly, different sources of energy consumption have diverse asymmetric effects on ecological footprint. The positive (negative) shocks to oil and gas consumption increase (decrease) ecological footprint. Thus, an increase in oil consumption has a deteriorating impact on environmental quality while a decrease in gas consumption has a favorable impact on environmental quality. The asymmetric relationships also hold between coal consumption, electricity consumption, and ecological footprint. The positive shocks to coal and electricity consumption are negatively related with environmental quality while negative shocks are positively related with environmental quality.

How agriculture, manufacture, and urbanization induced carbon emission? The case of Indonesia

The agriculture and manufacturing sectors are the backbones of the Indonesian economy; for this reason, research on the effects of these sectors on carbon emissions is an important subject. This work adds urbanization to enrich research on the Environmental Kuznets Curve (EKC) in Indonesia. The results of this study indicate that the EKC hypothesis was confirmed in Indonesia with a turning point of 2057.89 USD/capita. The research results show that all variables affect the escalation of greenhouse gas emissions in Indonesia. Furthermore, there is a bidirectional causality relationship between emissions with economic growth, emissions with agricultural sector, emissions with manufacturing sector, economic growth with agricultural sector, and economic growth with manufacturing. The unidirectional causality is found in emissions by urbanization and economic growth by urbanization. To reduce the impact of environmental damage caused by the activities of agriculture, manufacturing, and urbanization sectors, it is recommended that the government conduct water-efficient rice cultivation and increase the use of renewable energy.

Asymmetrical ARDL correlation between fossil fuel energy, food security, and carbon emission: providing fresh information from Pakistan

The core objective of our study seeks to examine the asymmetrical impact of agriculture, fossil fuel consumption, and food security on carbon emission (CO2) in Pakistan from 1969 to 2018. The current study applied multiple unit root tests (ADF, PP, and KPSS, Z&A) to check data stationarity and structural breaks. We used the population data as a food security proxy indicator. The outcomes disclosed that there is a long-term asymmetric relationship between the variables. The results also verified the atypical response of CO2 to adverse shocks in agricultural value-added. Furthermore, the results showed that population and fossil fuel consumption would further worsen environmental standards. Based on the results of the study, the government needs to take practical steps for active policy-making and assessing ecological challenges in Pakistan.

Symmetric and asymmetric impact of oil price, FDI and economic growth on carbon emission in Pakistan: Evidence from ARDL and non-linear ARDL approach

Several studies have examined the impact of economic growth on carbon emission; however, the symmetric and asymmetric impact of oil price along with FDI on carbon emission has not studied in the case of Pakistan. For this purpose, the long and short-run impact of per capita income, FDI, and oil price on carbon emissions investigated by employing the ARDL and non-linear ARDL cointegration methodology, along with Granger causality in the context of Pakistan for 1971-2014. This study confirms the EKC hypothesis for Pakistan under both methodologies, whereas symmetric results show that economic growth and FDI intensify carbon emission in both the long and short-run, while oil price increase emission in the short-run and reduces emission in the long-run. Whereas asymmetric results in the long-run show that an increase in oil price reduces emissions and decrease in oil price intensify emissions. The causality analysis also supports the above findings and suggests a feedback effect between economic growth and carbon emission in Pakistan. This study provides implications for policymakers, where the descending flow of FDI allows limited space to Pakistan in FDI selection; however, the presence of emission convergence and adoption of carbon pricing may facilitate Pakistan in achieving its environmental targets. While diversifying the overall energy mix towards more renewable/clean energy along with formulating favorable policies for the adoption of renewable energy like solar by the industrial and residential consumers can further reduce the overall emission levels.

Relationship between energy demand, financial development, and carbon emissions in a panel of 101 countries: "go the extra mile" for sustainable development

The objective of the study is to examine the impact of energy demand on carbon emissions in mediation of financial development and economic growth in a panel of 101 countries by using the time series data from 1995 to 2018. The study employed dynamic GMM estimator in order to reduce possible endogeneity in the given model. Further, the study used Granger causality and innovation accounting matrix (IAM) to find the causal relationships and variance error shocks between the variables. The results show that energy demand and FDI inflows increase carbon emissions, while financial development decreases carbon emissions across countries. Moreover, the results confirmed the inverted U-shaped relationship between income and emissions with a turning point of US$43,500. Among 101 countries, only 13 countries hold environmental Kuznets curve (EKC) hypothesis as their per capita income surpassed the stated turning point, while the remaining countries exhibit "race to the bottom" hypothesis. The feedback relationship is established between (i) income and carbon emissions, (ii) money supply and carbon emissions, and (iii) FDI inflows and energy demand across countries, whereas one-way linkages found in (i) carbon emissions to money supply, (ii) energy demand to money supply, (iii) money supply to FDI inflows and income, and (iv) energy demand to income across countries. The IAM analysis shows that energy demand, FDI inflows, and money supply will likely to increase carbon emissions, while money supply will decrease carbon emissions over a time horizon.

On the asymmetric effects of premature deindustrialization on CO2 emissions: evidence from Pakistan

In this modern era, environmental pollution is the biggest problem attached to industrialization. This study tries to ensure the relationship between industrialization and CO2 emissions in Pakistan for the time period 1980-2018 by using nonlinear ARDL model while controlling for urbanization, GDP, and human capital variables as a likely factor of CO2 emissions. Our foremost study objective is to examine whether or not the outcome of industrialization on CO2 emissions is symmetric or asymmetric for Pakistan that is one of the core suppliers to CO2 in South Asia, as the emissions were 0.82 million tons in 2018. Our result approves the presence of an asymmetric effect of industrialization shocks on CO2 emissions both in the short run and long run. The results reveal that industrialization increases emissions and deindustrialization decrease emissions, in short as well as long run, in Pakistan. Moreover, our finding also advises that urbanization and GDP variables have exerted a positive impact on CO2 emissions. Based on the findings, some policy suggestions are proposed for Pakistan.

Agriculture development and CO2 emissions nexus in Saudi Arabia

The agriculture sector may help to improve the environment of any country. The purpose of this research is to test the existence of environmental Kuznets curve (EKC) hypothesis while keeping the energy consumption and agriculture share in income into account and analyze their effects on the CO₂ emissions per capita of Saudi Arabia. We test both symmetrical, asymmetrical and quadratic effects of agriculture sector on the CO₂ emissions. An inverted U-shaped relationship between gross domestic product (GDP) per capita and CO₂ emissions per capita is found. Hence, EKC hypothesis is validated with a turning point at GDP per capita of 77,068 constant Saudi Riyal. Further, a negative and significant effect of agriculture sector on the CO₂ emissions per capita has been found both in symmetrical and asymmetrical analyses. The magnitudes of effects of increasing and decreasing agriculture share are found statistically different on the CO₂ emissions, and rising agriculture share in GDP has larger effect than that of decreasing agriculture share. An inverted U-shaped relationship is also found between agriculture share in GDP and CO₂ emissions per capita with a turning point at 3.22% agriculture share in GDP.

Nexus between financial development, energy consumption, income level, and ecological footprint in CEE countries: do human capital and biocapacity matter?

In recent decades, climate change and environmental pollution have been at the center of global environmental debates. Nowadays, researchers have turned their attention to the linkage between real output and environmental quality and test the environmental Kuznets curve. Majority of the studies focus on a single pollutant aspect and measure the deterioration of the environment through carbon emission (CO₂) only. In contrary, the current study uses a comprehensive proxy, ecological footprint, to measure the environmental quality of the sixteen Central and Eastern European Countries (CEECs). The aim of this paper is to discover the impact of financial development, economic growth, and energy consumption (renewable and non-renewable) on the environment. In addition, for the first time, the current study includes biocapacity and human capital in the growth-energy-environment nexus in the case of CEECs. In doing so, we used annual data of sixteen CEE countries in perspective of the One Belt One Road (OBOR) initiative and cover the period of 1991-2014. For reliable findings, this study focuses on second-generation econometric approaches to check stationarity, cross-sectional dependency, and co-integration among the model parameters. The long-run estimations of the "Dynamic Seemingly Unrelated-co-integration Regression" (DSUR) signify that the effect of economic growth on ecological footprint is not stable and validate N-shaped relationship for cubic functional form between per capita income and ecological footprint (environmental quality). Empirical evidence divulges that financial development and energy use significantly contribute to environmental degradation while renewable energy improves environmental quality by declining ecological footprint significantly. Moreover, the significant effects of biocapacity and human capital are positive and negative on the ecological footprint, respectively. In robustness check through the "Feasible Generalized Least Square" (FGLS) and "Generalized Method of Moment" (GMM) models, we found consistent result. Lastly, the "Dumitrescu-Hurlin (D-H) Panel Causality Test" demonstrates that two-way causal relationship exists between EF and GDP, EF and FD, EF and EU, EF and BC, and EF and HC, while one-way causality is running from RE to EF. This study puts the present scenario of CEE economies in front of the policymakers and suggests that they should consider the vital role of renewable energy and human capital to get sustainability.