Financial market development: A potentiating policy choice for the green transition in G7 economies

Bushra Naqvi, Syed Kumail Abbas Rizvi, Nawazish Mirza and Muhammad Umar

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: Despite the overwhelming literature claiming the environmental benefits of the transition towards a green economy, the evidence favoring these broad claims is still obscure and fuzzy. The present study makes two significant contributions to this important yet unsettled issue. First, we segregate the overall green transition in G7 economies into three different manifestations i.e., Green Energy, Green Industry, and Green Trade, to evaluate their idiosyncratic effects on the environment. Second, we assess the moderating role of financial development in green transition and ultimately in achieving the COP-26 targets. Our findings indicate that the transition towards green energy and the green industrial sector improves environmental quality, and the benefits are more pronounced with a high degree of financial development. In contrast, the transition towards green trade does not help in improving environmental quality and may have some adverse effects; however, financial development could mitigate some of these undesirable effects and help combat carbon emissions. The study emphasizes that policymakers should view financial development as a crucial policy choice to achieve COP-26 targets owing to its benign environmental impact.

Keywords: Green energy; Green innovation; Green trade; Financial development; Environmental quality (search for similar items in EconPapers)
JEL-codes: G18 G38 Q42 Q48 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923000935

DOI: 10.1016/j.irfa.2023.102577

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