The long-run environmental impacts of economic growth, financial development, and energy consumption: Evidence from emerging markets

In this study, the long-term interactions between carbon dioxide (CO2) emissions, real gross domestic product, fossil fuel consumption, and financial development are examined for 15 emerging markets during 1980-2014 by using heterogeneous dynamic panel data techniques. Long-run elasticity results show that the environmental Kuznets curve hypothesis is not valid for emerging markets. Besides, long-run findings reveal that fossil fuel energy consumption has a powerful negative impact on the environmental quality of emerging markets. Moreover, long-run findings of emerging markets show that 1% increase in financial development raises CO2 emissions at 0.76% level. Considering empirical findings, emerging markets should tend to use environmentally friendly technologies to avoid the possible environmental problems caused by pollution. Therefore, green energy investors should be supported by possible incentive policies. In addition, emerging markets should turn towards financial regulations, which extend credit channels for clean industries whereby emerging countries could achieve their sustainable development goals.