The Role of Financial Development in Reducing Carbon Emissions Intensity: An Empirical Analysis in Developing Countries

Abstract

Abstract

This study examines how financial development influences carbon emissions per unit of GDP across 64 developing nations between 2000 and 2021, analyzing 1,344 data points. Using various panel data analysis techniques, we find a statistically significant (1% level) negative relationship between financial development and carbon emission intensity. Specifically, a 1% increase in the financial development index is associated with a 10.9% decrease in carbon emissions per unit of GDP. Furthermore, our analysis highlights the crucial roles of several country-specific factors, including economic growth, GDP per capita, population size, trade openness, and energy consumption, in determining greenhouse gas emissions. Based on these findings, we propose policy recommendations aimed at fostering financial market development in Vietnam to contribute to carbon emissions reduction and the fulfillment of national environmental commitments and climate change mitigation goals

Keywords: Financial development, CO2, developing countries

JEL code: O1, G1, Q5