Abstract
This empirical study examines the endogenous relationship between carbon emissions (CO2), financial development, renewable energy, globalization, and institutional quality in 64 belt and road initiative countries (BRI) using a two-step system generalized method of moments (GMM) approach with panel data over the period 2003 to 2018. Furthermore, this study used (Dumitrescu & Hurlin, 2012) causality test to estimate the variables’ causal relationship. The results indicate that financial development significantly increases CO2 emissions and causes environmental degradation in BRI countries. However, renewable energy and globalization mitigate CO2 emissions and improve the quality of the environment. Institutional quality was positive in correlation with CO2 emission and indicates bad governance, corruption, weak bureaucracy, and improper implementation of environmental laws cause environmental degradation. Further, the study also reports a bidirectional relationship of financial development, renewable energy, and institutional quality with CO2 emissions and a unidirectional causality running from globalization to CO2 emissions in BRI countries. This study offers policymakers insight into restructuring the financial system, energy consumption pattern, and global integration and improving institutions’ quality for a sustainable environment and the economy at the national and regional levels.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Adeleye, N., & Eboagu, C. (2019). Evaluation of ICT development and economic growth in Africa. NETNOMICS: Economic Research and Electronic Networking, March. https://doi.org/10.1007/s11066-019-09131-6
Adger, N., & Coauthors including Fischlin, A (2018). Assessment report 5: Summary for policymakers. In Planning for Climate Change: A Reader in Green Infrastructure and Sustainable Design for Resilient Cities (Issues vii, 973, pp. 16–33). https://doi.org/http://www.ipcc.ch/publications_and_data/ar4/wg2/en/spm.html
Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68(1):29–51. https://doi.org/10.1016/0304-4076(94)01642-D
Arminen H (2018) In the energy-growth nexus. In The Economics and Econometrics of the Energy-Growth Nexus. Elsevier Inc. https://doi.org/10.1016/B978-0-12-812746-9/00010-9
Arminen H, Menegaki AN (2019) Corruption, climate and the energy-environment-growth nexus. Energy Economics 80:621–634. https://doi.org/10.1016/j.eneco.2019.02.009
Balsalobre-Lorente D, Shahbaz M, Roubaud D, Farhani S (2018) How economic growth, renewable electricity and natural resources contribute to CO2 emissions? Energy Policy 113(November 2017):356–367. https://doi.org/10.1016/j.enpol.2017.10.050
Bao C, Xu M (2019) Cause and effect of renewable energy consumption on urbanization and economic growth in China’s provinces and regions. Journal of Cleaner Production 231(2019):483–493. https://doi.org/10.1016/j.jclepro.2019.05.191
Beggs JJ, Nerlove M (1988) Biases in dynamic models with fixed effects. Economics Letters 26(1):29–31. https://doi.org/10.1016/0165-1765(88)90046-8
Bhattacharya M, Awaworyi Churchill S, Paramati SR (2017) The dynamic impact of renewable energy and institutions on economic output and CO2 emissions across regions. Renewable Energy 111:157–167. https://doi.org/10.1016/j.renene.2017.03.102
Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87(1):115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
Bond S (1991) Some tests of specification for panel data:monte carlo evidence and an application to employment equations. Review of Economic Studies 58(2):277–297. https://doi.org/10.2307/2297968
Carbon Footprint, (2018). Climate change. https://www.carbonfootprint.com/warming.html.
Cardenas LM, Franco CJ, Dyner I (2016) Assessing emissions-mitigation energy policy under integrated supply and demand analysis: The Colombian case. J Clean Prod 112:3759–3773. https://doi.org/10.1016/j.jclepro.2015.08.089
Chang CL, Ilomäki J, Laurila H, McAleer M (2020) Causality between CO2 emissions and stock markets. Energies 13(11):1–14. https://doi.org/10.3390/en13112893
Charfeddine L, Kahia M (2019) Impact of renewable energy consumption and financial development on CO2 emissions and economic growth in the MENA region: A panel vector autoregressive (PVAR) analysis. Renewable Energy 139:198–213. https://doi.org/10.1016/j.renene.2019.01.010
Charfeddine, L., Yousef Al-Malk, A., & Al Korbi, K. (2018). Is it possible to improve environmental quality without reducing economic growth: Evidence from the Qatar economy. Renewable and Sustainable Energy Reviews, 82(July 2017), 25–39. Elsevier Ltd. https://doi.org/10.1016/j.rser.2017.09.001
Chin, H. (2017). The belt and road initiative and its business implications. September, 1–62.
Chin, H., Lau, F., He, W., & Cheung, T. (2015). The silk road economic belt and the 21st century maritime silk road. Global Sourcing, Fung Busin(May).
Cole MA (2007) Corruption, income and the environment: An empirical analysis. Ecological Economics 62(3–4):637–647. https://doi.org/10.1016/j.ecolecon.2006.08.003
Doytch N, Uctum M (2016) Globalization and the environmental impact of sectoral FDI. Economic Systems 40(4):582–594. https://doi.org/10.1016/j.ecosys.2016.02.005
Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in heterogeneous panels. Economic Modelling 29(4):1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014
Dutt K (2009) Governance, institutions and the environment-income relationship: A cross-country study. Environment, Development and Sustainability 11(4):705–723. https://doi.org/10.1007/s10668-007-9138-8
Eren BM, Taspinar N, Gokmenoglu KK (2019) The impact of financial development and economic growth on renewable energy consumption: Empirical analysis of India. Science of the Total Environment 663:189–197. https://doi.org/10.1016/j.scitotenv.2019.01.323
Godil DI, Sharif A, Agha H, Jermsittiparsert K (2020) The dynamic nonlinear influence of ICT, financial development, and institutional quality on CO2 emission in Pakistan: new insights from QARDL approach. Environmental Science and Pollution Research 27(19):24190–24200. https://doi.org/10.1007/s11356-020-08619-1
Gökmenoğlu K, Taspinar N (2016) The relationship between CO2 emissions, energy consumption, economic growth and FDI: the case of Turkey. Journal of International Trade and Economic Development 25(5):706–723. https://doi.org/10.1080/09638199.2015.1119876
Grossman, G. M., & Krueger, A. B. (1995). Economic growth and the environment author(s): Gene M . Grossman and Alan B . Krueger Reviewed work(s): The Quarterly Journal of Economics, 110(2), 353–377.
Hao LN, Umar M, Khan Z, Ali W (2021) Green growth and low carbon emission in G7 countries: How critical the network of environmental taxes, renewable energy and human capital is? Science of the Total Environment 752:141853. https://doi.org/10.1016/j.scitotenv.2020.141853
HKTDC (2017) The belt and road initiative: Country profiles. Hktbc 6(2):1–4
Hunjra AI, Tayachi T, Chani MI, Verhoeven P, Mehmood A (2020) The moderating effect of institutional quality on the financial development and environmental quality nexus. Sustainability (Switzerland) 12(9):1–13. https://doi.org/10.3390/su12093805
Ibrahim MH, Law SH (2016) Institutional quality and CO2 emission–trade relations: Evidence from Sub-Saharan Africa. South African Journal of Economics 84(2):323–340. https://doi.org/10.1111/saje.12095
IEA, & OECD. (2018). Update on recent progress in reform inefficient fossil fuel subsidies that encourages wasteful consumption. G20 Energy Ministers’ Meeting, June, 13–14.
Jiang, C., & Ma, X. (2019). The impact of financial development on carbon emissions : A global perspective.
Jorgenson AK, Givens JE (2014) Economic globalization and environmental concern: A multilevel analysis of individuals within 37 nations. Environment and Behavior 46(7):848–871. https://doi.org/10.1177/0013916513479796
Kahia, M., Aïssa, M. S. Ben, & Lanouar, C. (2017). Renewable and non-renewable energy use - economic growth nexus: The case of MENA net oil importing countries. Renewable and Sustainable Energy Reviews 71(June 2015), 127–140. Elsevier. https://doi.org/10.1016/j.rser.2017.01.010
Khan A (2001) Financial development and economic growth. Macroeconomic Dynamics 5(3):413–433. https://doi.org/10.1017/s1365100500020046
Khan MTI, Yaseen MR, Ali Q (2017) Dynamic relationship between financial development, energy consumption, trade and greenhouse gas: Comparison of upper middle income countries from Asia, Europe, Africa and America. Journal of Cleaner Production 161:567–580. https://doi.org/10.1016/j.jclepro.2017.05.129
Khan Z, Ali S, Umar M, Kirikkaleli D, Jiao Z (2020)Consumption-based carbon emissions and International trade in G7 countries: The role of Environmental innovation and Renewable energy. Science of the Total Environment 730:138945. https://doi.org/10.1016/j.scitotenv.2020.138945
Krammer SMS (2010) International R&D spillovers in emerging markets: The impact of trade and foreign direct investment. Journal of International Trade and Economic Development 19(4):591–623. https://doi.org/10.1080/09638190902792464
Lau LS, Choong CK, Eng YK (2014) Carbon dioxide emission, institutional quality, and economic growth: Empirical evidence in Malaysia. Renewable Energy 68:276–281. https://doi.org/10.1016/j.renene.2014.02.013
Li Z, Xu N, Yuan J (2015) New evidence on trade-environment linkage via air visibility. Economics Letters 128:72–74. https://doi.org/10.1016/j.econlet.2015.01.014
Mishkin FS (2009) Globalization and financial development. Journal of Development Economics 89(2):164–169. https://doi.org/10.1016/j.jdeveco.2007.11.004
NDRC, FM &, MC (2015) Vision and action for jointly building the silk road economic belt and the 21st century maritime silk road. Bo'ao Forum, Hainan
Ozatac N, Gokmenoglu KK, Taspinar N (2017) Testing the EKC hypothesis by considering trade openness, urbanization, and financial development: the case of Turkey. Environmental Science and Pollution Research 24(20):16690–16701. https://doi.org/10.1007/s11356-017-9317-6
Ozturk I, Acaravci A (2010) CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews 14(9):3220–3225. https://doi.org/10.1016/j.rser.2010.07.005
Pérez K, González-Araya MC, Iriarte A (2017) Energy and GHG emission efficiency in the Chilean manufacturing industry: Sectoral and regional analysis by DEA and Malmquist indexes. Energy Economics 66:290–302. https://doi.org/10.1016/j.eneco.2017.05.022
Pesaran, M. H. (2004). *Hqhudo ’Ldjqrvwlf 7Hvwv Iru &Urvv 6Hfwlrq ’Hshqghqfh Lq 3Dqhov. University of Cambridge & USC, 3, Working Paper No.0435, June 2004.
Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics. 21(August 2012):1–21. https://doi.org/10.1002/jae
Rahman MM, Velayutham E (2020) Renewable and non-renewable energy consumption-economic growth nexus: New evidence from South Asia. Renewable Energy 147:399–408. https://doi.org/10.1016/j.renene.2019.09.007
Roodman D (2009) How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal 9(1):86–136. https://doi.org/10.1177/1536867x0900900106
Sadorsky P (2011) Some future scenarios for renewable energy. Futures 43(10):1091–1104. https://doi.org/10.1016/j.futures.2011.07.008
Saud S, Chen S, Haseeb A (2018) Impact of financial development and economic growth on environmental quality : an empirical analysis from Belt and Road Initiative ( BRI ) countries. Environmental Science and Pollution Research 17
Saud S, Chen S, Haseeb A, Sumayya (2020) The role of financial development and globalization in the environment: Accounting ecological footprint indicators for selected one-belt-one-road initiative countries. Journal of Cleaner Production 250:119518. https://doi.org/10.1016/j.jclepro.2019.119518
Shahbaz, M., Hye, Q. M. A., Tiwari, A. K., & Leitão, N. C. (2013). Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. In Renewable and Sustainable Energy Reviews (Vol. 25, pp. 109–121). Elsevier. https://doi.org/10.1016/j.rser.2013.04.009
Shahbaz M, Khan S, Ali A, Bhattacharya M (2017) The impact of globalization on CO2 emissions in China. Singapore Economic Review 62(4):929–957. https://doi.org/10.1142/S0217590817400331
Shahbaz M, Kumar Mahalik M, Jawad Hussain Shahzad S, Hammoudeh S (2019) Testing the globalization-driven carbon emissions hypothesis: International evidence. International Economics 158(July 2018):25–38. https://doi.org/10.1016/j.inteco.2019.02.002
Shahbaz M, Mallick H, Mahalik MK, Loganathan N (2015) Does globalization impede environmental quality in India? Ecological Indicators 52:379–393. https://doi.org/10.1016/j.ecolind.2014.12.025
Shahbaz M, Nasir MA, Roubaud D (2018) Environmental degradation in France: The effects of FDI, financial development, and energy innovations. Energy Economics 74:843–857. https://doi.org/10.1016/j.eneco.2018.07.020
Shahbaz M, Solarin SA, Ozturk I (2016) Environmental Kuznets Curve hypothesis and the role of globalization in selected African countries. Ecological Indicators 67:623–636. https://doi.org/10.1016/j.ecolind.2016.03.024
Sheraz, M., Deyi, X., Ahmed, J., & Ullah, S. (2021). Moderating the effect of globalization on financial development , energy consumption, human capital, and carbon emissions : evidence from G20 countries. Environmental Science and Pollution Research, 1-19. https://doi.org/10.1007/s11356-021-13116-0
Tamazian A, Bhaskara Rao B (2010) Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy Economics 32(1):137–145. https://doi.org/10.1016/j.eneco.2009.04.004
Ullah A, Kui Z, Ullah S, Pinglu C (2021) Sustainable utilization of financial and institutional resources in reducing income inequality and poverty. Sustainability 13(3):1038. https://doi.org/10.3390/su13031038
Uzar U (2020) Is income inequality a driver for renewable energy consumption? Journal of Cleaner Production 255:120287. https://doi.org/10.1016/j.jclepro.2020.120287
Wang H, Chen Q (2014) Impact of climate change heating and cooling energy use in buildings in the United States. Energy and Buildings 82(2014):428–436. https://doi.org/10.1016/j.enbuild.2014.07.034
Wang R, Mirza N, Vasbieva DG, Abbas Q, Xiong D (2020) The nexus of carbon emissions, financial development, renewable energy consumption, and technological innovation: What should be the priorities in light of COP 21 Agreements? Journal of Environmental Management 271(April):111027. https://doi.org/10.1016/j.jenvman.2020.111027
Wang Z, Danish Z, B., & Wang, B. (2018) The moderating role of corruption between economic growth and CO2 emissions: Evidence from BRICS economies. Energy 148:506–513. https://doi.org/10.1016/j.energy.2018.01.167
Zafar MW, Saud S, Hou F (2019) The impact of globalization and financial development on environmental quality: Evidence from selected countries in the organization for economic co-operation and development (OECD). Environmental Science and Pollution Research 26(13):13246–13262. https://doi.org/10.1007/s11356-019-04761-7
Zaidi SAH, Zafar MW, Shahbaz M, Hou F (2019) Dynamic linkages between globalization, financial development and carbon emissions: Evidence from Asia Pacific Economic Cooperation countries. Journal of Cleaner Production 228:533–543. https://doi.org/10.1016/j.jclepro.2019.04.210
Zhang YJ (2011) The impact of financial development on carbon emissions: An empirical analysis in China. Energy Policy 39(4):2197–2203. https://doi.org/10.1016/j.enpol.2011.02.026
Zioło M, Kluza K, Kozuba J, Kelemen M, Niedzielski P, Zinczak P (2020) Patterns of interdependence between financial development, fiscal instruments, and environmental degradation in developed and converging eu countries. International Journal of Environmental Research and Public Health 17(12):1–17. https://doi.org/10.3390/ijerph17124425
Acknowledgements
We are very grateful to the Dr. Hassan Arshad for their helpful comments and suggestions which improved the draft.
Data and materials availability
Data are available where need on request.
Funding
Project name: Major Program of the National Natural Science Foundation of China, “Supply Security and Management Policy of Strategic and Critical Mineral Resources in the New Era” (grant no: 71991482), National Natural Science Foundation of China, Natural Science Foundation of China (no. 72074197, and no. 71991480). The Open Fund Project of Hubei Provincial Research Base for Regional Innovation Capacity Monitoring and Analysis Soft Science (no. HBQY2020z10) and the Major Research Projects of Guangxi Department of Natural Resources in 2019 (Sub-bid C) (no. GXZC2019-G3-25122-GXGL-C).
Author information
Authors and Affiliations
Contributions
All authors contributed conceptually and formally in original drafting. All authors contributed. Responsibilities are as follows: Muhammad Sheraz: conceptualization; formal analysis; methodology; writing—original draft preparation. Xu Deyi: supervision; funding acquisition; validation; writing—review and editing. Muhammad Zubair Mumtaz: conceptualization; methodology; formal analysis. Atta Ullah: validation; writing—review and editing; conceptualization.
Corresponding author
Ethics declarations
Ethics approval
This study did not use any data which need approval.
Consent to participate
All authors participated in the process of draft completion. All authors have read and agreed to the published version of the manuscript.
Consent to publish
All authors agree to publish.
Competing interests
The authors declare no competing interests.
Additional information
Responsible Editor: Nicholas Apergis
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendices
Appendix 1
Appendix 2
Appendix 3
Figures of normal distribution of variables
Appendix 4
Rights and permissions
About this article
Cite this article
Sheraz, M., Deyi, X., Mumtaz, M.Z. et al. Exploring the dynamic relationship between financial development, renewable energy, and carbon emissions: A new evidence from belt and road countries. Environ Sci Pollut Res 29, 14930–14947 (2022). https://doi.org/10.1007/s11356-021-16641-0
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-021-16641-0