THE RELATIONSHIP BETWEEN CO2 EMISSIONS AND FINANCIAL DEVELOPMENT: EVIDENCE FROM OECD COUNTRIES

This paper examines the relationships among CO2 emissions, energy use, GDP, and financial development for 25 OECD countries over the 1971-2007 period. From the results of the panel FMOLS and the cross-sectional dependence regression, we do not find any support for the existence of the EKC for OECD countries. Moreover, the results present that the coefficient of financial development to CO2 emissions is negative and statistically significant for eight countries (Austria, Denmark, Germany, Ireland, the Netherlands, Norway, Portugal, and the U.S.). The findings of this study thus show that financial development can help EU countries to adjust their CO2 emissions.