Does financial openness mitigate carbon emissions? Evidence from a cross-country study

Xiaobo Fang, Dahai Fu, Yushi Xian and Ying Zhang

Finance Research Letters, 2025, vol. 75, issue C

Abstract: This study empirically investigates the impact of financial openness on carbon emission intensities at the country-level. Utilizing a fixed effects model and a comprehensive dataset across more than 100 countries from 1971 to 2019, we find that financial openness significantly reduces carbon emission intensities. The results are robust to various sensitivity analyses and control for potential endogeneity issues. The analysis of dynamic effects indicates that financial openness has a long-term reducing effect on carbon emissions. We also explore the mechanisms through which financial openness affects carbon emissions, including energy structure transformation and economic transition.

Keywords: Financial openness; Carbon emissions; Energy structure; Economic transition (search for similar items in EconPapers)
JEL-codes: F15 F21 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001400

DOI: 10.1016/j.frl.2025.106875

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