The impact of financial development, renewable energy investment and renewable energy consumption on Co₂ emissions in asian developing countries: Insights from Cs-Ardl

Abstract

Climate change remains one of the world's most pressing problems, significantly affecting the environment, economy, human health, and sustainable development. Human activities, particularly industrial, transportation, and agricultural sectors, contribute to greenhouse gas emissions, with CO₂ emissions being a major concern. Recognizing the severity of CO₂ emissions, This study examines how CO2 emissions (CO2E) in developing Asian nations are impacted by financial development (FD), renewable energy investment (RI), and renewable energy consumption (RENE) between 2000 and 2022. This region is selected due to the significant impacts of urbanization and industrialization on environmental degradation. The research utilizes the CS-ARDL method to analyze short-term and long-term relationships while addressing econometric challenges like cross-country dependence and non-linearity. The results show that investments in renewable energy and CO2 emissions have a U-shaped connection. Initially, investment in renewable energy reduces emissions, but as investment increases, the effect reverses. Financial development is essential for reducing CO2 emissions since it supports ecologically friendly projects and facilitates the adoption of green technologies. Additionally, the consumption of renewable energy greatly lowers CO2 emissions, though its effectiveness varies among countries based on factors such as Inflation, Trade Openness, and Foreign Direct Investment (FDI) inflows. These insights provide valuable guidance for policymakers and businesses, stressing the necessity of policies for renewable energy that are specific to the circumstances of each nation. The study underscores the necessity of creating a more environmentally friendly future by striking a balance between environmental sustainability and economic prosperity.