Abstract
Several studies have examined the relationship between environmental performance and economic development. However, most of them did not take sustainable development and financial development into account. The study argues that sustainable financial and economic development contributes to reducing greenhouse gas emissions. We use the panel data regression model to capture the relationship between greenhouse gas emission and sustainable economic and financial development. The panel data refers to the period of 2007–2017. The EU 25 countries were analysed. The results show that the relationship between sustainable financial development and environmental degradation is more relevant for converging economies than developed countries. We found that the variable “energy productivity” has the strongest impact on greenhouse gas emissions for both country groups (converging and developed); however, it increases for developed countries and it decreases the greenhouse gas emissions for converging economies. We also found that environmental taxes are an efficient instrument that mitigates greenhouse gas emissions, especially in developed countries group.
Highlights
Research regarding the consequences of economic growth in the context of its impact on the environment (Environmental Kuznets curve) has been conducted for many years [1]
The general results of the study are as follows:. For both groups of countries, the impact of economic and financial development on greenhouse gas emissions is confirmed; the patterns in the field of greenhouse gas emissions and explanatory variables vary between both groups of the countries in the scope of their impact directions and the number and significance of their explanatory variables; the dependencies between economic and financial development are much stronger for the group of converging economies than those of the developed one;
This study revealed that this problem can be tackled with some socio-economic policies, economic growth does not solve the issue of environmental degradation in converging economies
Summary
Research regarding the consequences of economic growth in the context of its impact on the environment (Environmental Kuznets curve) has been conducted for many years [1]. The importance of these studies is increasing in the context of the growing impact of environmental risks and the impact of ESG factors (Environmental, Social, Governance) on financial performance [2]. There are questions regarding the relationship between financial and economic development and environmental factors in the context of environmental degradation, in particular growing air pollution and smog. The results of studies on the dependencies between environmental degradation and development and economic growth are not conclusive.
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