Impact of financial development on the energy intensity of developing countries

Abstract

Climate change is an important and urgent challenge facing the world, affecting the survival and development of human beings from multiple dimensions such as environment and economy. Carbon emissions are a barometer of climate change, and energy consumption is closely related to carbon emissions. Reducing energy consumption can reduce carbon emissions, thereby optimizing the human living environment. Compared with developed countries, the carbon emissions and energy consumption of developing countries are still growing strongly, so it's significant to study the energy consumption of developing countries. Energy intensity can be reduced through reducing energy intensity, and financial development can have an impact on energy intensity. So, using panel data from 67 developing countries from 1995 to 2018, this study selected six financial development indicators and uses the system Generalized Method of Moments (sys-GMM for short) establishes a dynamic panel model to study the impact of financial development on energy intensity from the six aspects of access, depth and efficiency of financial institutions and financial markets, which are more implementable and more realistic for formulating relevant financial policies to reduce energy intensity. We introduced the index of industrial structure upgrading and studied the interaction between financial development and financial development in the impact of financial development on energy intensity for the first time. The findings revealed that improving financial institutions' access, depth, and efficiency, as well as financial markets' access, depth, and efficiency, might dramatically lower developing countries' energy intensity. The improvement of industrial structure resulted in a reduction in the energy intensity of financial development. Furthermore, the 67 developing countries were grouped from five different perspectives, and the influence of financial development on energy intensity reduction was found to be robust. Therefore, the research results significantly reduce energy intensity for financial development in developing countries.