Does natural resources rent promote carbon neutrality: The role of digital finance

Abstract

China is regarded as the leading carbon emitter country in the world. Therefore, China has been striving to achieve carbon neutrality. To move towards carbon neutrality targets, there is a need to understand/explore the drivers of carbon emissions. Hence, this empirical investigation discerns the impact of natural resources rent, digital finance, and the combined effect of natural resources rent and digital finance on carbon emissions for China for the period of 1990–2022. This study utilizes a novel augmented ARDL approach. Our empirical results reveal that natural resources escalate carbon emissions during the short-run and long-run. On the contrary, digital finance curbs emissions across time horizons. Further, the combined impact of natural resources and digital finance is negative, indicating that natural resources amid digital finance impede carbon emissions in China. We propose policymakers should introduce policies to discourage natural resource extraction. For this purpose, taxes on natural resource extraction industries may be applied.