Do financial markets mitigate CO2 emissions worldwide? Modelling under dynamic panel data. (2016)

• Record Type: Journal Article
• Authors: Ramlall, Indranarain
• Is Part Of: International journal of green economics. Volume 10:Number 2(2016)
• Page Start: 107
• Page End: 118
• Publication Date: 2016
• Subjects: CO2 -- carbon dioxide -- carbon emissions -- energy consumption -- EKC hypothesis -- environmental Kuznets curve -- market capitalisation -- greener economies -- financial markets -- modelling -- dynamic panel data -- economy greening; Environmental economics -- Periodicals; Sustainable development -- Periodicals; 333.7
• Languages: English
• ISSNs: 1744-9928

Abstract

This study investigates the determinants of CO2 emissions for a panel of 38 countries for the period spanning from 1988 to 2008. Compared to previous studies, the current research explicitly incorporates the role of financial markets as they are hypothesised to play an important role in abating CO2 emissions by absorbing funds away from mostly polluting real production activities. Dynamic panel estimation is particularly convenient based on the cumulative nature of CO2 emissions. Results show strong lagged effects of CO2 emissions. Energy consumption is found to constitute the most important determinant of CO2 emissions. Interestingly, financial markets do exert a statistically significant but not economically significant effect on CO2 emissions as the elasticities values hover around −0.03% to −0.04%. Nonetheless, such a finding signifies that, in the long-run, developed financial markets are inherently imbued with strong scope for greening of the economies. Finally, the positive effect of reserves on CO2 emissions implies that governments could levy reserves as part of their long-term engagement in reducing the effects of climate change.