The influence of stock market and financial institution development on carbon emissions with the importance of renewable energy consumption and foreign direct investment in G20 countries

The present study aims to analyze the influence of stock market and financial institution development on carbon emissions by incorporating the role of renewable energy consumption and foreign direct investment in the function of carbon emissions on G20 member countries from 1981-217. Further, the empirical analysis is carried out on the full sample and sub-samples of developed and developing economies by employing panel econometric techniques. The findings confirm that the stock market development index reduces carbon emissions in the full sample and developed countries while increases carbon emissions in developing countries. However, the index of financial institution development increases carbon emissions in the full sample and developed countries but effect is found insignificant in the case of developing economies. The renewable energy consumption reduces the level of environmental degradation across the panels. Similarly, foreign direct investment increases environmental quality in the full sample and emerging economies while impede environmental quality in the developed economies. On the basis of empirical results, this study recommends policy implications.

Automated summary

The study finds that stock market development reduces carbon emissions, but increases carbon emissions in developing countries; the impact of financial institution development on carbon emissions is relatively weak in developing countries; renewable energy consumption helps to reduce environmental degradation, while foreign direct investment has a negative impact on environmental quality in developed countries.