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UK's net-zero carbon emissions target: Investigating the potential role of economic growth, financial development, and R&D expenditures based on historical data (1870–2017)

Muhammad Shahbaz (), Muhammad Ali Nasir (), Erik Hille () and Mantu Mahalik ()

Technological Forecasting and Social Change, 2020, vol. 161, issue C

Abstract: The 4th industrial revolution and global decarbonisation are frequently referred to as two interrelated megatrends. Particularly, where the 4th industrial revolution is expected to fundamentally change the economy, society, and financial systems, it may also create opportunities for a zero-carbon future. Therefore, in the context of UK's legally binding commitment to achieve a net-zero emissions target by 2050, we analyse the role of economic growth, R&D expenditures, financial development, and energy consumption in causing carbon dioxide (CO2) emissions. Employing the bootstrapping bounds testing approach to examine short- and long-run relationships, our analysis is based on historical data from 1870 to 2017. The results suggest the existence of cointegration between CO2 emissions and its determinants. Financial development and energy consumption lead to environmental degradation, but R&D expenditures help to reduce CO2 emissions. The estimated environmental effects of economic growth support the EKC hypothesis. While a U-shaped relationship is found between financial development and CO2 emissions, the nexus between R&D expenditures and CO2 emissions is analogues to the EKC. In the context of the efforts to tackle climate change, our findings suggest policy prescriptions by using financial development and R&D expenditures as the key tools to meet the emissions target.

Keywords: CO2 Emissions; Economic Growth; Financial Development; R&D Expenditures; Net-zero Emissions (search for similar items in EconPapers)
JEL-codes: C22 O44 Q54 Q55 (search for similar items in EconPapers)
Date: 2020
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Working Paper: UK’s net-zero carbon emissions target: Investigating the potential role of economic growth, financial development, and R&D expenditures based on historical data (1870 - 2017) (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:161:y:2020:i:c:s0040162520310817

DOI: 10.1016/j.techfore.2020.120255

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