Energy efficiency and environment: examining the role of financial expansion for emerging economies

This research aims to investigate the factors influencing carbon emissions in the emerging economies while particularly focusing on the energy efficiency and financial expansion. Since the debate regarding the influence of economic growth, energy efficiency, and financial expansion is still ongoing with the contradictory arguments during the last few years, such issue may lead to inefficient policy adoption, which lead this research to re-investigate the impact of these variables on CO₂ emissions. This study uses advance econometric approaches on the data for emerging economies covering the period from 1990 to 2021. The examined results indicate the validity of cross-section dependence and long-run cointegration association between the study variables. Dur the issue of non-normal distribution of the variables, this study uses the novel non-parametric method which offers comprehensive evidence of the positive impact of economic growth and financial expansion on carbon emissions. In contrast, the results illustrate that energy efficiency and research and development investment significantly and adversely affect carbon emissions in the emerging economies and improve environmental sustainability. The robustness of the model is validated via bootstrap quantile regression. This study suggests strengthening financial expansion, improving energy efficiency, and increasing research and development investment to attain low carbon economy.