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Revisiting financial expansion and energy efficiency nexus with environment: empirical evidence from RCEP countries

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Abstract

The global economies are rapidly taking action to reduce climate change issues. However, RCEP economies are still paying attention to economic stability, while efforts are needed to explore their influencing factors of environmental quality, which are hardly explored in the literature. To fill the gap, this study examines the influence of financial expansion and energy efficiency on carbon emissions in RCEP countries. Covering the extended period from 1990 to 2021, this study employs various diagnostic tests such as the normality test, slope homogeneity, and panel cross-section dependency. The cointegration of all the variables is found to exist. By applying the non-parametric techniques (method of moment quantile regression), the results indicate that economic growth is the only significant factor of environmental deterioration in the region. Whereas, energy efficiency and technological advancement significantly reduce the carbon emissions level. On the contrary, the financial expansion is found asymmetrically affecting the emissions level, which reduces emissions in the lower and medium quantiles while increasing the carbon level in the higher quantiles. The robustness of the results is validated by using quantile regression. This study suggests increased investment in energy efficiency and technological innovation. Also, the results suggested the expansion of the green financial system, which could be a promising tool for the environment and sustainable development.

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Data availability

The data that support the findings of this study are available from World Bank (2022). It can be accessed via https://databank.worldbank.org/source/world-development-indicators#advancedDownloadOptions

Abbreviations

ARDL:

Autoregressive distributed lag

EKC:

Environmental Kuznets curve

CO2 :

Carbon dioxide

RCEP:

Regional Comprehensive Economic Partnership

GDP:

Gross domestic product

FE:

Financial expansion

ENEF:

Energy efficiency

TI:

Technological innovation

MMQR:

Method of moment quantile regression

SCH:

Slope coefficient heterogeneity

PCD:

Panel cross-section dependence

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Authors and Affiliations

  1. School of Finance and Accounting, Fuzhou University of International Studies and Trade, Fuzhou, 350202, China

    Su Lin & Haijun Kang

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The idea of the original draft belongs to Su Lin and Haijun Kang. Su Lin designed the experiment and collect the dataset. The introduction and literature review sections are written by Haijun Kang.

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Correspondence to Su Lin.

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Lin, S., Kang, H. Revisiting financial expansion and energy efficiency nexus with environment: empirical evidence from RCEP countries. Energy Efficiency 17, 7 (2024). https://doi.org/10.1007/s12053-024-10186-0

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