Abstract
Concerns regarding environmental sustainability have generally been an important element in achieving long-term development objectives. However, developing countries struggle to deal with these concerns, which all require specific treatment. As a result, this study explores the interaction between financial development, renewable energy consumption, technological innovations, and CO2 emissions in India from 1980 to 2019, taking into account the critical role of economic progress and urbanization. The Autoregressive Distributed Lag (ARDL) model is used to quantify long-run dynamics, while the Vector Error Correction Model is used to identify causal direction (VECM). According to the study’s conclusions, financial development has a considerable positive impact on CO2 emissions. The coefficient of renewable energy consumption and technical innovations, on the other hand, is strongly negative in both the short and long run, indicating that increasing these measures will reduce CO2 emissions. Furthermore, economic expansion and urbanization have a negative impact on environmental quality since they emit a significant amount of CO2 into the atmosphere. The results of the robustness checks were obtained using the Fully Modified Ordinary Least Squares (FMOLS), the Dynamic Ordinary Least Squares (DOLS), and the Canonical Cointegration Regression (CCR) approaches to verify the findings. The VECM results reveal that there is long-run causality in CO2 emissions, financial development, renewable energy utilization, and urbanization. A range of diagnostic tests were also used to confirm the validity and reliability. This study delivers new findings that contribute to the existing literature and may be of particular interest to the country’s policymakers in light of the financial system and its role in environmental issues.
Highlights
IntroductionEnergy is a necessary component for an economy to adopt long term progress
This study examines the effect of financial development (FD), renewable energy consumption (REC), and technological innovation (TI) on CO2 emissions in India
This paper explores the effects of the financial development index, renewable energy consumption, technological innovation, economic development, and urbanization on CO2 emissions in India during 1980–2019
Summary
Energy is a necessary component for an economy to adopt long term progress. Its everincreasing need has intensified in recent times and is still increasing currently. The increased demand for energy is due to a number of factors including population increase, improved lifestyles, manufacturing advancements, and economic competitiveness. Global energy consumption surged by 44 percent between 1971 and 2014 [1,2]. CO2 emissions have grown by 31% during the last 200 years, and the average global warming has risen by 0.4–0.8 ◦ C in the past century [3]. Environmental pollution, primarily triggered by CO2 emissions, has become a worldwide problem. Governments have recently been more cognizant of the concern; for example, the Kyoto Protocol entered into effect in 2005 to decrease overall emissions of greenhouse gases created by industrialized nations
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