Financial inclusion and trade adjusted carbon emissions: Evaluating the role of environment related taxes employing non‐parametric panel methods

Abstract

AbstractTrade adjusted or consumption‐based carbon emissions relatively is a new area of research. Trade adjusted carbon emissions is adjusted by deducting exports, adding imports and production based carbon emissions. This measure enables to capture the importance or contribution of international trade to global carbon emissions. This study further highlights each country's contribution to global carbon emissions through trade. This study aims to explore the possible determinants of trade adjusted carbon emissions for group of seven economies from 2000–2020. This study used a novel index for financial inclusion along with the role of environment related taxes and environment related innovation is also tested. The study uses non parametric method of panel data, that is, method of moments quantile regression, along with panel cointegration and diagnostic tests to detect interdependence and heterogeneity in the slop. Moreover, this study also tested the role of exports and imports with GDP for trade adjusted carbon emissions. The empirical findings from this study suggest that exports, environment related innovation and taxes and financial inclusion cause a reduction in trade or consumption‐based carbon emissions. Moreover, both imports and gross domestic product cause an upsurge in consumption or trade adjusted carbon emissions. This study provides practical policy implications in the light of empirical findings related to environment related taxes, financial inclusion, exports, environment related innovations, imports and gross domestic product.