Abstract
The study analyzes the role of financial development on CO2 emissions based on the primary studies in the existing literature. However, the heterogeneity in reported effect size estimates of the primary studies complicates to test the competing hypotheses for the role of financial development on CO2 emissions. The paper tries to determine and quantify the representative empirical genuine effect of financial development on CO2 emissions, if any. To address the issue, a meta-regression analysis has been carried out for 275 estimation results from 72 primary studies. We have found a substantial publication selection bias in the literature due to the design characteristics of the primary studies. The results suggest the presence of an authentic positive empirical effect of financial development on CO2 emissions beyond publication selection bias. Hence, financial development leads to environmental degradation. The effect of financial development on carbon emissions changes both in magnitude and direction depending on which financial development indicator is used, which estimation technique is employed, which countries or region are included and which time period is analyzed.
Similar content being viewed by others
References
Abbasi F, Riaz K (2016) CO2 emissions and financial development in an emerging economy: an augmented VAR approach. Energy Policy 90:102–114
Abid M (2016) Impact of economic, financial, and institutional factors on CO2 emissions: evidence from sub-Saharan Africa economies. Util Policy 41:85–94
Acheampong AO (2019) Modelling for insight: does financial development improve environmental quality? Energy Econ 83:156–179
Ali A, Khatoon S, Ather M, Akhtar N (2015a) Modeling energy consumption, carbon emission and economic growth: empirical analysis for Pakistan. Int J Energy Econ Policy 5(2):624–630
Ali S, Waqas H, Ahmad N (2015b) Analyzing the dynamics of energy consumption, liberalization, financial development, poverty and carbon emissions in Pakistan. J Appl Environ Biol Sci 5(4):166–183
Ali HS, Law SH, Lin WL, Yusop Z, Chin L, Bare UAA (2019) Financial development and carbon dioxide emissions in Nigeria: evidence from the ARDL bounds approach. GeoJournal 84(3):641–655
Alper A, Onur G (2016) Environmental Kuznets curve hypothesis for sub-elements of the carbon emissions in China. Nat Hazards 82(2):1327–1340
Amri F (2018) Carbon dioxide emissions, total factor productivity, ICT, trade, financial development, and energy consumption: testing environmental Kuznets curve hypothesis for Tunisia. Environ Sci Pollut Res 25(33):33691–33701
Asumadu-Sarkodie S, Owusu PA (2016) Energy use, carbon dioxide emissions, GDP, industrialization, financial development, and population, a causal nexus in Sri Lanka: with a subsequent prediction of energy use using neural network. Energy Sources, Part B: Economics, Planning, and Policy 11(9):889–899
Aye GC, Edoja PE (2017) Effect of economic growth on CO2 emission in developing countries: evidence from a dynamic panel threshold model. Cogent Economics & Finance 5(1):1379239
Baloch MA, Meng F, Zhang J, Xu Z (2018) Financial instability and CO 2 emissions: the case of Saudi Arabia. Environ Sci Pollut Res 25(26):26030–26045
Balogh JM, Jámbor A (2017) Determinants of CO2 emission: a global evidence. Int J Energy Econ Policy 7(5):217–226
Boutabba MA (2014) The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Econ Model 40:33–41
Çetin M, Ecevit E (2017) The impact of financial development on carbon emissions under the structural breaks: empirical evidence from Turkish economy. J Econ Manag Perspect 11(1):64–78
Cetin M, Ecevit E, Yucel AG (2018) The impact of economic growth, energy consumption, trade openness, and financial development on carbon emissions: empirical evidence from Turkey. Environ Sci Pollut Res 25(36):36589–36603
Charfeddine L, Kahia M (2019) Impact of renewable energy consumption and financial development on CO2 emissions and economic growth in the MENA region: a panel vector autoregressive (PVAR) analysis. Renew Energy 139:198–213
Charfeddine L, Khediri KB (2016) Financial development and environmental quality in UAE: Cointegration with structural breaks. Renew Sust Energ Rev 55:1322–1335
Claessens S, & Feijen E (2007). Financial sector development and the millennium development goals. The World Bank
Dasgupta S, Laplante B, Mamingi N (2001) Pollution and capital markets in developing countries. J Environ Econ Manag 42(3):310–335
De Haas, R., & Popov, A. A. (2018). Financial development and industrial pollution. Eur Bank Reconstruc Dev, working paper no. 217
Dogan E, Seker F (2016a) The influence of real output, renewable and non-renewable energy, trade and financial development on carbon emissions in the top renewable energy countries. Renew Sust Energ Rev 60:1074–1085
Dogan E, Seker F (2016b) An investigation on the determinants of carbon emissions for OECD countries: empirical evidence from panel models robust to heterogeneity and cross-sectional dependence. Environ Sci Pollut Res 23(14):14646–14655
Dogan E, Turkekul B (2016) CO 2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23(2):1203–1213
Efendic A, Pugh G, Adnett N (2011) Institutions and economic performance: a meta-regression analysis. Eur J Polit Econ 27(3):586–599
Farhani S, Ozturk I (2015) Causal relationship between CO 2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia. Environ Sci Pollut Res 22(20):15663–15676
Haifeng XU, Yang LI, HUANG H (2017) Spatial research on the effect of financial structure on CO2 emission. Energy Procedia 118:179–183
Hao Y, Zhang ZY, Liao H, Wei YM, Wang S (2016) Is CO 2 emission a side effect of financial development? An empirical analysis for China. Environ Sci Pollut Res 23(20):21041–21057
Haseeb A, Xia E, Baloch MA, Abbas K (2018) Financial development, globalization, and CO 2 emission in the presence of EKC: evidence from BRICS countries. Environ Sci Pollut Res 25(31):31283–31296
Huang L, Zhao X (2018) Impact of financial development on trade-embodied carbon dioxide emissions: evidence from 30 provinces in China. J Clean Prod 198:721–736
Ibrahim MH (2018) Trade–finance complementarity and carbon emission intensity: panel evidence from middle-income countries. Environ Syst Decis 38(4):489–500
Işik C, Kasımatı E, Ongan S (2017) Analyzing the causalities between economic growth, financial development, international trade, tourism expenditure and/on the CO2 emissions in Greece. Energy Sources, Part B: Economics, Planning, and Policy 12(7):665–673
Jalil A, Feridun M (2011) The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Econ 33(2):284–291
Jamel L, Maktouf S (2017) The nexus between economic growth, financial development, trade openness, and CO2 emissions in European countries. Cogent Econo Finance 5(1):1341456
Javid M, Sharif F (2013) Energy Consumption, Financial development and CO2 emissions in Pakistan
Javid M, Sharif F (2016) Environmental Kuznets curve and financial development in Pakistan. Renew Sust Energ Rev 54:406–414
Jensen AL (1996) Beverton and Holt life history invariants result from optimal trade-off of reproduction and survival. Can J Fish Aquat Sci 53(4):820–822
Karimzadeh M, Bazkhaneh ST, Dalfardi HK, Barakchian M (2014) Studying the relationship between financial development and emissions of Carbon Dioxide in Iran: using Autoregressive-Distributed Lag. Open Access J Resistive Econ (OAJRE) 2:94–105 96
Katircioğlu ST, Taşpinar N (2017) Testing the moderating role of financial development in an environmental Kuznets curve: empirical evidence from Turkey. Renew Sust Energ Rev 68:572–586
Khan AQ, Saleem N, Fatima ST (2018) Financial development, income inequality, and CO 2 emissions in Asian countries using STIRPAT model. Environ Sci Pollut Res 25(7):6308–6319
Khoshnevis Yazdi S, Ghorchi Beygi E (2018) The dynamic impact of renewable energy consumption and financial development on CO2 emissions: for selected African countries. Energy Sources, Part B: Economics, Planning, and Policy 13(1):13–20
Khuong ND (2017) Factors affecting CO2 emission in Vietnam: a panel data analysis. Organ Mark Emerg Econ 9(2)
Lee JM, Chen KH, Cho CH (2015) The relationship between CO2 emissions and financial development: evidence from OECD countries. Singapore Econ Rev 60(05):1550117
Lu WC (2018) The impacts of information and communication technology, energy consumption, financial development, and economic growth on carbon dioxide emissions in 12 Asian countries. Mitig Adapt Strateg Glob Chang 23(8):1351–1365
Menon P (2019) An Indian story on carbon emission, energy consumption, trade openness, and financial development. J Public Affairs 19:e1953
Mohammadi T (2017) Economic growth, financial development and CO2 emission: PSTR approach. Iran J Econ Stud 5(2):145–171
Nazir MR, Nazir MI, Hashmi SH, Fareed Z (2018) Financial development, income, trade, and urbanization on Co2 emissions: new evidence from Kyoto annex countries. J Innov Sustain. RISUS ISSN 2179–3565 9(3):17–37
Omri A, Daly S, Rault C, Chaibi A (2015) Financial development, environmental quality, trade and economic growth: what causes what in MENA countries. Energy Econ 48:242–252 IZA DP No 8868
Ozturk I, Acaravci A (2013) The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Econ 36:262–267
Park Y, Meng F, Baloch MA (2018) The effect of ICT, financial development, growth, and trade openness on CO 2 emissions: an empirical analysis. Environ Sci Pollut Res 25(30):30708–30719
Pata UK (2018a) Renewable energy consumption, urbanization, financial development, income and CO2 emissions in Turkey: testing EKC hypothesis with structural breaks. J Clean Prod 187:770–779
Pata UK (2018b) The effect of urbanization and industrialization on carbon emissions in Turkey: evidence from ARDL bounds testing procedure. Environ Sci Pollut Res 25(8):7740–7747
Rasoulinezhad E, Saboori B (2018) Panel estimation for renewable and non-renewable energy consumption, economic growth, CO 2 emissions, the composite trade intensity, and financial openness of the commonwealth of independent states. Environ Sci Pollut Res 25(18):17354–17370
Sadorsky P (2010) The impact of financial development on energy consumption in emerging economies. Energy Policy 38(5):2528–2535
Saidi K, Mbarek MB (2017) The impact of income, trade, urbanization, and financial development on CO 2 emissions in 19 emerging economies. Environ Sci Pollut Res 24(14):12748–12757
Salahuddin M, Gow J, Ozturk I (2015) Is the long-run relationship between economic growth, electricity consumption, carbon dioxide emissions and financial development in gulf cooperation council countries robust? Renew Sust Energ Rev 51:317–326
Salahuddin M, Alam K, Ozturk I, Sohag K (2018) The effects of electricity consumption, economic growth, financial development and foreign direct investment on CO2 emissions in Kuwait. Renew Sust Energ Rev 81:2002–2010
Shahbaz M (2012). Multivariate granger causality between CO2 emissions, energy intensity, financial development and economic growth: evidence from Portugal. MPRA paper no. 37774
Shahbaz M, Islam F, & Muhammad Sabihuddin B (2011). Financial development, energy consumption and CO2 emissions: evidence from ARDL approach for Pakistan. MPRA paper no. 30138
Shahbaz M, Solarin SA, & Mahmood H (2012). Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. MPRA paper no. 40603
Shahbaz M, Hye QMA, Tiwari AK, Leitão NC (2013a) Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renew Sust Energ Rev 25:109–121
Shahbaz M, Solarin SA, Mahmood H, Arouri M (2013b) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152
Shahbaz M, Tiwari AK, Nasir M (2013c) The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energy Policy 61:1452–1459
Shahbaz M, Destek MA, Polemis ML (2018) Do foreign capital and financial development affect clean energy consumption and carbon emissions? Evidence from BRICS and Next-11 countries. SPOUDAI-J Econ Bus 68(4):20–50
Shahzad SJH, Rehman MU, Hurr M, & Zakaria M (2014). Do economic and financial development increase carbon emission in Pakistan: empirical analysis through ARDL cointegration and VECM causality. MPRA paper no. 60310
Shahzad SJH, Kumar RR, Zakaria M, Hurr M (2017) Carbon emission, energy consumption, trade openness and financial development in Pakistan: a revisit. Renew Sust Energ Rev 70:185–192
Sharif A, Raza SA, Ozturk I, Afshan S (2019) The dynamic relationship of renewable and nonrenewable energy consumption with carbon emission: a global study with the application of heterogeneous panel estimations. Renew Energy 133:685–691
Shi X, Liu H, Riti JS (2019) The role of energy mix and financial development in greenhouse gas (GHG) emissions’ reduction: evidence from ten leading CO 2 emitting countries. Econ Polit 36(3):695–729
Siddique HMA (2017) Impact of financial development and energy consumption on CO2 emissions: evidence from Pakistan. Bull Bus Econ 6:68–73
Solarin SA (2014) Tourist arrivals and macroeconomic determinants of CO2 emissions in Malaysia. Anatolia 25(2):228–241
Stanley TD (2005) Beyond publication bias. J Econ Surv 19(3):309–345
Stanley TD (2008) Meta‐regression methods for detecting and estimating empirical effects in the presence of publication selection. Oxford Bulletin of Economics and statistics, 70(1):103–127
Stanley, T. D., Doucouliagos, H., Giles, M., Heckemeyer, J. H., Johnston, R. J., Laroche, P., ... & Rosenberger, R. S. (2013). Meta-analysis of economics research reporting guidelines. J Econ Surv, 27(2), 390–394
Sy A, Tinker T, Derbali A, Jamel L (2016) Economic growth, financial development, trade openness, and CO2 emissions in European countries. Afr J Acc Aud Finance 5(2):155–179
Tamazian A, Rao BB (2010) Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy Econ 32(1):137–145
Tamazian A, Chousa JP, Vadlamannati KC (2009) Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energy Policy 37(1):246–253
Tsaurai K (2019) The impact of financial development on carbon emissions in Africa. Int J Energy Econ Policy 9(3):144–153
Ugur M (2014) Corruption's direct effects on per-capita income growth: a meta-analysis. J Econ Surv 28(3):472–490
World Bank (2000) Is Globalization Causing a „Race to the Bottom “in Environmental standard. PREM Economic Policy Group and Development Economics Group
Xiong L, Tu Z, Ju L (2017) Reconciling regional differences in financial development and carbon emissions: a dynamic panel data approach. Energy Procedia 105:2989–2995
Xu Z, Baloch MA, Meng F, Zhang J, Mahmood Z (2018) Nexus between financial development and CO 2 emissions in Saudi Arabia: analyzing the role of globalization. Environ Sci Pollut Res 25(28):28378–28390
You WH, Zhu HM, Yu K, Peng C (2015) Democracy, financial openness, and global carbon dioxide emissions: heterogeneity across existing emission levels. World Dev 66:189–207
Zaidi SAH, Zafar MW, Shahbaz M, Hou F (2019) Dynamic linkages between globalization, financial development and carbon emissions: evidence from Asia Pacific economic cooperation countries. J Clean Prod 228:533–543
Acknowledgments
I would like to thank Mehmet Ugur for his instant replies to my e-mails regarding the application of metaregression analysis.
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Nicholas Apergis
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendix 1
Appendix 1
Rights and permissions
About this article
Cite this article
Gök, A. The role of financial development on carbon emissions: a meta regression analysis. Environ Sci Pollut Res 27, 11618–11636 (2020). https://doi.org/10.1007/s11356-020-07641-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-020-07641-7