Is Financial Development Important for Zambia’s Low Carbon Growth? An Extension of the STIRPAT Model

Abstract

Following the growing global concerns about environmental sustainability, this study aimed to assess the role of financial development in Zambia’s low carbon growth using an asymmetric approach. Data collected from secondary sources for carbon dioxide emission, population, economic growth and financial development cover the period between 1980 and 2019. The results obtained from applying the nonlinear ARDL bounds technique revealed that the variables maintain a long-run relationship. Furthermore, estimates show that in the long-run, increase financial development and economic growth deter the achievement of low carbon growth while in the short-run, economic growth alone supports low carbon growth. Meanwhile, population and financial development were found to have no effect on carbon emissions in both the long-run and short-run. Accordingly, the study recommends that relevant government authorities should put policies in place, which encourages green investment and a switch over to cleaner energy sources. This would support a sustainable environment as the economy grows and becomes financially developed.