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THE EFFECTS OF FINANCIAL DEVELOPMENT ON $CO_2$ EMISSIONS: EVIDENCE FROM ASEAN COUNTRIES
Keywords:
financial development, CO2 emissions, ASEANDOI:
https://doi.org/10.17654/0972361725035Abstract
With the rapid development of industry and modern life worldwide, CO2 emissions pose a significant challenge for all countries, impacting both present and future generations. Studying the factors influencing CO2 emissions serves as a valuable tool for governments to mitigate emission levels and safeguard human lifestyles. In this context, the study is conducted to explore the relationship between financial development and CO2 emissions intensity across nine Southeast Asian Nations (ASEAN countries) from 2000 to 2021. The findings, derived from three distinct analytical methods, consistently demonstrate a statistically significant negative impact of financial development on CO2 emissions intensity at the 1% level. Specifically, a 1% increase in the financial development index is associated with a 19.9% reduction in CO2 emission intensity. This indicates that financial development has contributed to reducing greenhouse gas emissions in these nations. The regression results also showed that all components of financial development negatively influence CO2 emissions and statistically significant at the 1% level. Specifically, a 1% increase in Financial Accessibility, Financial Depth, and Financial Efficiency is associated with 58.8%, 37.0%, and 4.0% reductions in emission intensity, respectively. Additionally, the study highlights that economic growth, GDP per capita, population, trade openness, and energy consumption all have significant effects on a country’s greenhouse gas emissions. Based on these insights, the author offers policy recommendations for developing ASEAN countries financial market to support its emission reduction targets and sustainable development goals by 2050.
Received: October 8, 2024
Revised: March 11, 2025
Accepted: March 24, 2025
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