Drivers and mitigants of resources consumption in China: Discovering the role of digital finance and environmental regulations

Abstract

Efficient resource consumption is one of the global challenges of the era to attain economic and environmental sustainability. The high-level consumption of resources has a detrimental effect on the environment. Simultaneously, the low-level resource consumption hindered economic growth; therefore, it is crucial to identify the key factors that can instigate resource conservation without affecting economic and environmental sustainability. This study investigates the role of digital finance and environmental regulation in China as the mitigants of resource consumption. The study applied the “bootstrapping autoregressive distributed lag” (BARDL) approach to investigate the long-run cointegration among digital finance, environmental regulations (environmental taxes), economic growth, and material footprint (proxy of resources consumption) by employing the quarterly data from 2011 to 2020. The preliminary finding through the diagnostic test confirms the normal distribution of the data. Likewise, the unit root tests confirmed the integration order of I (1). The outcomes of the advanced cointegration approach and the dynamic process of BARDL demonstrate that the increase in environmental taxes and digital finance significantly reduced the material footprint. In contrast, the upsurge in economic growth expands the material footprint in the long and short run. It shows that environmental taxes and digital finance work as mitigants while economic growth is the key driver to accelerating resource consumption. Thus, the appropriate policy intervention for these factors can significantly change resource consumption. Hence, China must implement strict regulations to strengthen the environmental tax mechanism and support digital finance to achieve economic and environmental sustainability goals.