Skip to main content

Advertisement

SpringerLink
Log in

The decline in carbon intensity: the role of financial expansion and hydro-energy

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

The effect of a broad financial index (FD), hydro-energy output, and expansion of the economy on the intensity of carbon were investigated by incorporating the effect of financial expansion through the channel of hydro-energy. The cross-sectional autoregressive distributed lag (CS-ARDL), Mean Group (MG), Augmented Mean Group (AMG), and vector error correction mechanism causality approaches were employed to study panel data for the period from 1980 to 2017 for the top four hydro-energy producing states. The outcomes revealed that FD raises the intensity of carbon in both the short and long term. In contrast, hydro-energy output (HYP) is stated to be a significant factor for attaining a low carbon intensity in the short and long term. The outcomes also indicated that the expansion of the economy augments the intensity of carbon. However, FD lowers the intensity of carbon via the channel of hydro-energy. The causality test outcomes revealed a short-run causality moving from the intensity of carbon to hydro-energy as well as a short-term causality moving from GDP to the intensity of carbon. It was also observed that there is a long-term causality running from all the variables to the intensity of carbon. Important policy implications are suggested at the end of the research.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Availability of data and materials

The data that support the findings of this study is available on request.

References

  • Al Mamun A, Mohamad MR, Yaacob MRB, Mohiuddin M (2018) Intention and behavior towards green consumption among low-income households. J Environ Manag 227:73–86

    Google Scholar 

  • Ali K, Bakhsh S, Ullah S. et al. (2021) Industrial growth and CO2 emissions in Vietnam: the key role of financial development and fossil fuel consumption. Environ Sci Pollut Res 28, 7515–7527. https://doi.org/10.1007/s11356-020-10996-6

    Article  CAS  Google Scholar 

  • Alkhathlan K, Javid M (2013) Energy consumption, carbon emissions and economic growth in Saudi Arabia: an aggregate and disaggregate analysis. Energy Policy 62:1525–1532

    Google Scholar 

  • Al-mulali U, Weng-Wai C, Sheau-Ting L, Mohammed AH (2015) Investigating the environmental Kuznets curve (EKC) hypothesis by utilizing the ecological footprint as an indicator of environmental degradation. Ecol Indic 48:315–323

    Google Scholar 

  • Amin A, Dogan E, Khan Z (2020) The impacts of different proxies for financialization on carbon emissions in top-ten emitter countries. Sci Total Environ 740:140127. https://doi.org/10.1016/j.scitotenv.2020.140127

    Article  CAS  Google Scholar 

  • Ang JB (2008) A survey of recent developments ın the lıterature of fınance and growth. J Econ Surv 28(3):536–576

    Google Scholar 

  • Assi AF, Isiksal AZ, Tursoy T (2020) Highlighting the connection between financial development and consumption of energy in countries with the highest economic freedom. Energy Policy 147:111897

    Google Scholar 

  • Bello MO, Solarin SA, Yen YY (2018) The impact of electricity consumption on CO2 emission, carbon footprint, water footprint and ecological footprint: the role of hydropower in an emerging economy. J Environ Manag 219:218–230

    Google Scholar 

  • Bernanke BS, Gertler M, Gilchrist S (1999) The financial accelerator in a quantitative business cycle framework. Handbook of macroeconomics. 1:1341-1393.

    Google Scholar 

  • Bildirici ME (2014) Hydropower energy consumption, environmental pollution, and economic growth. J Energy Dev 40(1/2):189–208

    Google Scholar 

  • Bildirici ME, Gökmenoğlu SM (2017) Environmental pollution, hydropower energy consumption and economic growth: evidence from G7 countries. Renew Sust Energ Rev 75:68–85

    Google Scholar 

  • Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47:239–253

    Google Scholar 

  • 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 25:36589–36603

    CAS  Google Scholar 

  • Chudik A, Mohaddes K, Pesaran MH, Raissi M (2016)Long-run effects in large heterogeneous panel data models with cross-sectionally correlated errors. Emerald Group Publishing Limited

  • Destek MA, Aslan A (2020) Disaggregated renewable energy consumption and environmental pollution nexus in G-7 countries. Renew Energy 151:1298–1306

    Google Scholar 

  • Eberhardt M, Teal F (2010) Productivity analysis in global manufacturing production. Discussion Paper 515 Department of Economics, University of Oxford. Retrieved from: http://www.economics.ox.ac.uk/research/WP/pdf/paper515.pdfAccessed 01 Aug 2020

  • Eberhardt M, Teal F (2011) Econometrics for grumblers: a new look at the literature on cross-country growth empirics. J Econ Surv 2:109–155

    Google Scholar 

  • Ecevit E (2015) Urbanization, energy consumption and CO2 emissions in sub-Saharan countries: a panel cointegration and causality. J Econ Dev Stud 3(2):66–76

    Google Scholar 

  • Engle RF, Granger CWJ (1987)Co-integration and error correction: representation, estimation, and testing. Econometrica 55:251–276

    Google Scholar 

  • Fearnside PM (1999) Social ımpacts of Brazil’s Tucuruí Dam. Environ Manag 24(4):485–495

    Google Scholar 

  • Frey GW, Linke DM (2002) Hydropower as a renewable and sustainable energy resource meeting global energy challenges in a reasonable way. Energy Policy 30(14):1261–1265

    Google Scholar 

  • Gagnon L, Vate JF (1997) Greenhouse gas emissions from hydropower: the state of research in 1996. Energy Policy 25(1):7–13

    Google Scholar 

  • IMF (2019) Available at: https://www.imf.org/en/Data. Accessed on 1st of August 2020

  • Javid M, Sharif F (2016) Environmental Kuznets curve and financial development in Pakistan. Renew Sust Energ Rev 54:406–414

    Google Scholar 

  • Lau E, Tan CC, Tang CF (2016) Dynamic linkages among hydroelectricity consumption, economic growth, and carbon dioxide emission in Malaysia, Energy Sources, Part B: Economics, Planning, and Policy, 11(11):1042-1049. DOI: 10.1080/15567249.2014.922135

  • Liang D, Tian Z, Ren F, Pan J (2020) Installed hydropower capacity and carbon emission reduction efficiency based on the EBM method in China. Front Energy Res 8:82

    Google Scholar 

  • Lotfalipour MR, Falahi MA, Ashena M (2010) Economic growth, CO2 emissions, and fossil fuels consumption in Iran. Energy 35:5115–5120

    Google Scholar 

  • Nasir MA, Canh NP, Le TNL (2020) Environmental degradation & role of financialisation, economic development, industrialisation and trade liberalisation. J Environ Manag 277:111471

    Google Scholar 

  • O’Connell P (1998) The overvaluation of purchasing power parity. J Int Econ 44:1–19

    Google Scholar 

  • Omri (2013) CO2 emissions, energy consumption and economic growth nexus in MENA countries: evidence from simultaneous equations models. Energy Econ 40(C):657–664

    Google Scholar 

  • Pao HT, Chen CC (2019) Decoupling strategies: CO2 emissions, energy resources, and economic growth in the Group of Twenty. J Clean Prod 206:907–919

    CAS  Google Scholar 

  • Pao HT, Tsai CM (2011) Modeling and forecasting the CO2 emissions, energy consumption, and economic growth in Brazil. Energy. 36:2450–2458 https://doi.org/10.1016/j.energy.2011.01.032

    Google Scholar 

  • Pata K, Aydin M (2020) Testing the EKC hypothesis for the top six hydropower energy-consuming countries: evidence from Fourier Bootstrap ARDL procedure. J Clean Prod 264:121699

    Google Scholar 

  • Pata UK, Yilanci V (2020) Financial development, globalization and ecological footprint in G7: further evidence from threshold cointegration and fractional frequency causality tests. Environ Ecol Stat 27(4):803–825

    Google Scholar 

  • Pesaran MH (2004) General diagnostic tests for cross section dependence in panels. University of Cambridge, Cambridge Working Papers in Economics No. 0435

  • Pesaran MH (2006) Estimation and inference in large heterogenous panels with multifactor error structure. Econometrica 74:967–1012

    Google Scholar 

  • Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Econ 22:265–312

    Google Scholar 

  • Pesaran MH, Smith R (1995) Estimating long-run relationships from dynamic heterogeneous panels. J Econ 68(1):79–113

    Google Scholar 

  • Pesaran MH, Yamagata T (2008) Testing slope homogeneity in large panels. J Econ 142(1):50–93

    Google Scholar 

  • Rajan RG, Zingales L (2003) The great reversals: the politics of financial development in the 20th century. J Financ Econ 69(1):5–50

    Google Scholar 

  • Rudberg PM, Escobar M, Gantenbein J, Niiro N (2015) Mitigating the adverse effects of hydropower projects: a comparative review of river restoration and hydropower regulation in Sweden and the United States. Geo Environ Law Rev 27:251–274

    Google Scholar 

  • Rudd MD, Dahm PF, Rajab MH (1993) Diagnostic comorbidity in persons with suicidal ideation and behavior. Am J Psychiatry 150:928–934

    CAS  Google Scholar 

  • Sadorsky P (2010) The impact of financial development on energy consumption in emerging economies. Energy Policy 38(5):2528–2535

    Google Scholar 

  • SEEG (2019) Available at: http://seeg.eco.br/en. Accessed on 15th of August 2020

  • Shahbaz M, Hye QMA, Tiwari AK, Leitao NC (2013) Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renew Sust Energ Rev 25:109–121

    Google Scholar 

  • Shahbaz M, Omay T, Roubaud D (2018) Sharp and smooth breaks IN unit root testing OF renewable energy consumption. J Energy Dev 44:5–40

    Google Scholar 

  • Solarin SA, Ozturk I (2016) The relationship between natural gas consumption and economic growth in OPEC members. Renew Sust Energ Rev 58(C):1348–1356

    Google Scholar 

  • Solarin SA, Al-Mulali U, Ozturk I (2017) Validating the environmental Kuznets curve hypothesis in India and China: the role of hydroelectricity consumption. Renew Sust Energ Rev 80:1578–1587

    Google Scholar 

  • Statista (2019) Available at: https://www.statista.com/. Accessed on 1st of August 2020

  • Tahir T, Luni T, Majeed MT (2021) The impact of financial development and globalization on environmental quality: evidence from South Asian economies. Environ Sci Pollut Res 28:8088–8101. https://doi.org/10.1007/s11356-020-11198-w

    Article  Google Scholar 

  • Tahseen S, Karney B (2017) Opportunities for increased hydropower diversion at Niagara: an SWOT analysis. Renew Energy 101:757–770

    Google Scholar 

  • Ummalla M, Samal A (2018) The impact of hydropower energy consumption on economic growth and CO2 emissions in China. Environ Sci Pollut Res 25(35):35725–35737

    CAS  Google Scholar 

  • Ummalla M, Samal A, Goyari P (2019) Nexus among the hydropower energy consumption, economic growth, and CO2 emissions: evidence from BRICS countries. Environ Sci Pollut Res 26(34):35010–35022

    CAS  Google Scholar 

  • UNIDO (2016) Industrial Development Report 2016. The role of technology and innovation in inclusive and sustainable industrial development

  • Vieira MA, Dalgaard KG (2013) The energy-security–climate-change nexus in Brazil. Environmental Politics 22(4):610–626

    Google Scholar 

  • Wang R, Mirza N, Vasbieva DG, Abbas Q, Xiong D (2020) The nexus of carbon emissions, financial development, renewable energy consumption, and technological innovation: What should be the priorities in light of COP 21 Agreements? J Environ Manag 271(6–10):111027

    Google Scholar 

  • Westerlund J (2007) Testing for error correction in panel data. Oxf Bull Econ Stat 69:709–748

    Google Scholar 

  • World Bank (2008) Available at: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/452391468323718231/the-world-bank-annual-report-2008-year-in-review. Accessed on 15th of October 2020

  • World Bank (2019) Available at: https://data.worldbank.org/. Accessed on 1st of August 2020

  • Yüksel I (2008) Hydropower in Turkey for a clean and sustainable energy future. Renew Sust Energ Rev 12(6):1622–1640

    Google Scholar 

  • Zeqiraj V, Sohag K, Soytas U (2020) Stock market development and low-carbon economy: the role of innovation and renewable energy. Energy Econ 91:104908

    Google Scholar 

  • Zhang (2011) The impact of financial development on carbon emissions: an empirical analysis in China. Energy Policy 39(4):2197–2203

    Google Scholar 

Download references

Acknowledgements

I would like to thank the editor and anonymous reviewers for the insightful comments that helped to improve the paper.

Author information

Authors and Affiliations

  1. Near East University, ZIP: 99138, Nicosia/TRNC, Mersin, 10, Turkey

    Aliya Zhakanova Isiksal

Authors
  1. Aliya Zhakanova Isiksal
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

The author conducted conceptualization, data collection, methodology, and writing of the article.

Corresponding author

Correspondence to Aliya Zhakanova Isiksal.

Ethics declarations

Ethics approval

Not applicable.

Consent for publication

Not applicable.

Consent to participate

Not applicable.

Consent for publication

Not applicable.

Conflict of interest

The author declares no competing interests.

Additional information

Responsible Editor: Nicholas Apergis

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Isiksal, A.Z. The decline in carbon intensity: the role of financial expansion and hydro-energy. Environ Sci Pollut Res 29, 16460–16471 (2022). https://doi.org/10.1007/s11356-021-16117-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-021-16117-1

Keywords

Search

Navigation