Abstract
The discourse on the impact of financial development and its effects on environmental quality has been an important research area in the last few decades. The objective of this research attempts to test the technology effect hypothesis on environmental mitigation in the case of Saudi Arabia (KSA) over the period 1970-2016 and the STIRPAT (Stochastic Impacts by Regression on Population, Affluence, and Technology) with the Autoregressive Distributed Lag (ARDL) model used for empirical inquest. Unlike others, we insert additional variables such as technology, human capital, and the technology effects of financial development into the carbon dioxide emission model. We used the Ng-Perron unit root test to examine the stationary properties of the variables. Similarly, to examine the presence of the cointegration relationship between carbon dioxide emissions and its determinants, the Bound cointegration with multiple structural breaks approach is applied. First, The empirical findings show that financial development and technology have a negative and significant impact on environmental degradation. Second, the technology effects of financial development have an unfortunate effect on environmental mitigation. Finally, lower environmental mitigation is associated with a deepening in total population and affluence. Moreover, findings from the pairwise Granger causality test point that there is no causality running from both financial development and technology to the effect of technology among KSA. On the opposite, we looked at economic growth Granger, cause environmental quality. In addition, a unidirectional causality was seen running from environmental quality to financial development. Similarly, the relationship between affluence and financial development in KSA is unidirectional. Thus, various policy implications should be proposed to policymakers as enhancing the expansion of technology, especially in the industrial sector by incorporating renewable energy consumption to upgrade environmental quality.
Highlights
For the sake to survive, human devoted all his efforts to invent several and various means and tools shutting for making nature obedient to his will
The coefficient of financial development indicates that a 1% rise in financial development decreases CO2 emissions by 0.24% in model 1, this outcome supply that financial development upgrades the environmental quality in Saudi Arabia
In Saudi Arabia’s status, we establish no bidirectional causality between environmental quality and technology; instead, we looked at economic growth Granger, cause environmental quality
Summary
For the sake to survive, human devoted all his efforts to invent several and various means and tools shutting for making nature obedient to his will. His selfishness and greediness do make him unaware and even reckless about the environment and ecosystem services. Anthropogenic activities boost demand and supply, magnify consumption, and enlarge fossil fuels combustion. These activities have generated global warming and carbon dioxide emissions which are driven by financial development, real GDP, urbanization, foreign trade, and fossil fuel energy. Tremendous attention is turned on the linkage between financial development and environmental degradation which let policymakers feel trapped in having such a trade-off between boosting the economy and degrading the environment
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