Financial Development Consequences on the Quality of the Environment: A Case of Developing Countries

Shahzad Jamil, Abdul Qayyum Khan and Muhammad Yar Khan
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Shahzad Jamil: Department of Management Sciences, COMSATS University Islamabad, WAH Campus, Pakistan.
Abdul Qayyum Khan: Department of Management Sciences, COMSATS University Islamabad, WAH Campus, Pakistan.

International Journal of Energy Economics and Policy, 2023, vol. 13, issue 3, 325-333

Abstract: The study aims to analyze the Financial Development, Economic Development, Governance, and consumption of Fossil Fuels impact on Environmental Quality. Panel data of 40 developing countries for the period of 1996-2019 were examined by applying the System Generalized method of moments (GMM) technique of Blundell and Bond (1998). The results show that financial and economic development in developing countries is at the stake of environmental degradation. The governance impact is negative but low compared to other variables in the study, which shows that governance in these developing economies is not up to the mark and needs continuous improvement to maximize the impact of governance on environmental quality. Fossil fuels consumption in the sample countries showed a devastating effect on environmental quality. Financial reforms are needed to encourage and give incentives to the firms to adopt environmentally friendly technologies, which will result in development in a more sustainable way in developing economies. Easy access to low-interest loans in developing economies will help farmers and live stockholders to adopt new technologies and rethink their approaches to using fertilizers and livestock production to mitigate the emissions of CH4 and N2O. Renewable energy sources (solar panel-generated energy in industries and households, electric cars, etc.) in these developing economies will help to tackle the increase in greenhouse gases emissions because of fossil fuel consumption.

Keywords: Financial; Development.; Economic; Development.; Governance.; Fossil; Fuels.; Environmental; Quality.; Generalized; method; of; moments (search for similar items in EconPapers)
JEL-codes: G2 O1 O16 Q32 Q5 Q54 (search for similar items in EconPapers)
Date: 2023
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