ABSTRACT The impact of digital finance on carbon dioxide emissions has generated conflicting findings, with some studies suggesting emissions reduction while others point to the contrary. To gain clarity amidst this contradictory evidence, examining the moderating role of institutional quality is crucial. This research delved into the intricate relationship between digital finance, institutional quality, and CO2 emissions across 45 African countries from 2004 to 2021. By employing the dynamic system-generalized method of moment (sys-GMM) technique, the study revealed a positive relationship between digital finance and CO2 emissions. However, a key discovery emerged as the analysis considered the moderating role of institutional quality. The results highlighted the significant decrease in CO2 emissions that results from the interaction between institutional quality and digital finance. Furthermore, there is a critical point at which well-established institutions start to offset the environmental consequences associated with digital finance. The positive impact of digital finance on emissions is mitigated when institutions reach a certain threshold level of quality.
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