The Impact of Sustainable Financial Development and Green Energy Transition on Climate Change in the World’s Highest Carbon-Emitting Countries

Mehdi Seraj () and Fatma Turuc Seraj
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Mehdi Seraj: Department of Economics, Near East University, 99138 Nicosia, Cyprus
Fatma Turuc Seraj: Department of Economics, Near East University, 99138 Nicosia, Cyprus

Sustainability, 2025, vol. 17, issue 9, 1-21

Abstract: The increasing risks posed by climate change have turned CO 2 emissions into a pressing global issue, prompting the widespread adoption of sustainable development policies. This study investigates the empirical drivers of CO 2 emissions across 15 of the world’s highest carbon-emitting countries from 2000 to 2021, using a range of advanced panel data techniques. The core explanatory variables include green energy transition (GET), fossil fuel consumption (FFC), financial development (FD), mineral resource consumption (MRC), energy intensity (EI), and information and communication technology (ICT). By employing cross-sectional dependence tests, CIPS and CADF unit root tests, cointegration techniques (Westerlund and Dickey-Fuller), and Driscoll-Kraay standard error (DKSE) estimators, the study ensures robust and reliable inference. The findings reveal that a 1% increase in GET and FD leads to a 1.59% and 4.51% decrease in CO 2 emissions, respectively, while higher energy efficiency (EI) also significantly reduces emissions. In contrast, greater use of fossil fuels, mineral resources, and ICT expansion contributes positively to emissions. These results demonstrate the critical role of financial systems, clean energy investments, and energy efficiency in mitigating environmental degradation. The study offers targeted policy insights for countries aiming to balance economic growth with climate goals and highlights the need for enhanced technology transfer and financing mechanisms in low- and middle-income countries.

Keywords: carbon emissions; sustainable financial development; fossil fuel consumption; green energy transition; sustainable development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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