Effect of Financial Development, Economic Growth on Environment Pollution: Evidence from G-7 based ARDL Cointegration Approach

Abstract

Several opinions have influence on the factors of environmental pollution in G-7 countries. However, the main objective is to scrutinize the impacts of financial development, green Investment, economic growth, and energy efficiency on environmental pollution in the context of the G-7 nations. In order to fill this gap, this study was carried out using annual penal data from 1997 to 2021. The results of the Panel ARDL model confirm that green Investment, economic growth (GDP), and financial development have a positive and significant relationship with CO2 emissions in long run. However, energy efficiency has a negative impact on CO2 emissions in the G-7 countries. Based on its results, the report advises that expenditures in green investment be increased in order to reduce environmental pollution in the G-7 nations. Enhancing financial sector advancements is a crucial way for the nation to achieve its targets for sustainable development. One method of lowering environmental pollution in society is to make investments in energy efficiency. The G-7 should spend additional funds on energy efficiency measures in light of the aforementioned. Additionally, changes in the banking system have demonstrated a substantial influence on the pollution of the environment. Low levels of environmental pollution are caused by this financial prosperity in the countries.