Nexus between Financial Development, Renewable Energy Consumption, Technological Innovations and CO 2 Emissions: The Case of India

Muhammad Qayyum, Minhaj Ali, Mir Muhammad Nizamani, Shijie Li, Yuyuan Yu and Atif Jahanger
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Muhammad Qayyum: School of Economics, Hainan University, Haikou 570228, China
Minhaj Ali: School of Economics, Zhongnan University of Economics and Law, Wuhan 430073, China
Mir Muhammad Nizamani: School of Life and Pharmaceutical Sciences, Hainan University, Haikou 570228, China
Shijie Li: School of Economics, Hainan University, Haikou 570228, China
Yuyuan Yu: School of International Economics and Trade, Central University of Finance and Economics, Beijing 102206, China

Energies, 2021, vol. 14, issue 15, 1-19

Abstract: Concerns regarding environmental sustainability have generally been an important element in achieving long-term development objectives. However, developing countries struggle to deal with these concerns, which all require specific treatment. As a result, this study explores the interaction between financial development, renewable energy consumption, technological innovations, and CO 2 emissions in India from 1980 to 2019, taking into account the critical role of economic progress and urbanization. The Autoregressive Distributed Lag (ARDL) model is used to quantify long-run dynamics, while the Vector Error Correction Model is used to identify causal direction (VECM). According to the study’s conclusions, financial development has a considerable positive impact on CO 2 emissions. The coefficient of renewable energy consumption and technical innovations, on the other hand, is strongly negative in both the short and long run, indicating that increasing these measures will reduce CO 2 emissions. Furthermore, economic expansion and urbanization have a negative impact on environmental quality since they emit a significant amount of CO 2 into the atmosphere. The results of the robustness checks were obtained using the Fully Modified Ordinary Least Squares (FMOLS), the Dynamic Ordinary Least Squares (DOLS), and the Canonical Cointegration Regression (CCR) approaches to verify the findings. The VECM results reveal that there is long-run causality in CO 2 emissions, financial development, renewable energy utilization, and urbanization. A range of diagnostic tests were also used to confirm the validity and reliability. This study delivers new findings that contribute to the existing literature and may be of particular interest to the country’s policymakers in light of the financial system and its role in environmental issues.

Keywords: financial development; renewable energy; technological innovations; CO 2 emissions; ARDL; India (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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