The impact of financial development, renewable energy and political stability on carbon emissions: sustainable development prospective for arab economies

Ammar Al-Zubairi (), Aseer AL-Akheli () and Barakat ELfarra ()
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Ammar Al-Zubairi: Southwestern University of Finance and Economics
Aseer AL-Akheli: Southwestern University of Finance and Economics
Barakat ELfarra: Southwestern University of Finance and Economics

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 7, No 10, 15273 pages

Abstract: Abstract This study investigates the impact of financial development, renewable energy, political stability, economic growth, fossil fuel consumption, and urbanization on CO2 emissions in Arab countries. Employing panel data analysis from 2000 to 2020, the research uses advanced econometric methods including FMOLS, DOLS, and FGLS to ensure robustness in addressing statistical challenges like heteroscedasticity and autocorrelation. The findings reveal that financial development and renewable energy are negatively associated with CO2 emissions, underscoring the role of robust financial systems in fostering sustainability and the urgency of transitioning to cleaner energy sources. Interestingly, political stability is positively correlated with emissions, highlighting the complexities in aligning economic growth with environmental sustainability. However, this relationship is moderated by the interaction between financial development and political stability, suggesting the influence of well-developed financial institutions in politically stable environments towards promoting greener practices. Conversely, economic growth and fossil fuel consumption show a positive influence on emissions, emphasizing the critical need for sustainable development policies and the adoption of cleaner energy alternatives. Urbanization, on the other hand, displays a modest negative relationship with emissions, indicating the benefits of sustainable urban planning and eco-friendly practices. The study offers several policy recommendations for Arab countries, including strengthening financial institutions, advocating for renewable energy, balancing economic and environmental goals, enhancing political stability, promoting sustainable urban development, reducing reliance on fossil fuels, and engaging in international cooperation. These measures are essential for mitigating CO2 emissions and contributing to a sustainable future globally.

Keywords: Climate change; Financial development; Political stability; Sustainability; Arab countries (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-024-04703-5

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