DOES ENVIRONMENTAL DEGRADATION AN OUTCOME OF ECONOMIC DEVELOPMENT? THE ROLE OF FINANCIAL DEVELOPMENT AND ENERGY CONSUMPTION
DOI:
https://doi.org/10.29121/granthaalayah.v10.i6.2022.4677Keywords:
Environmental Degradation, Energy Consumption, Financial Development, Economic Growth, ARDL ModelAbstract [English]
Carbon emissions from the burning of fossil fuels and greenhouse gas emissions induce global warming which is a serious and challenging environmental threat in the contemporary era. By applying time series data and analyzing through econometric techniques, such as unit root tests, bound techniques, ARDL techniques and causality techniques, this article examines the impact of economic growth, financial development, and energy consumption on CO2 emissions over the period 1990 to 2019 in Sri Lanka. According to the study’s conclusions, all variables are cointegrated in the long run. The causality analysis reveals that unidirectional causality runs from environmental degradation to financial development and environmental degradation and energy consumption, whereas bidirectional causality is found between financial development and energy consumption in the long run. Further, the findings revealed that energy consumption and financial development have a statistically significant positive impact on environmental degradation in the long run as well as the short run. Financial innovation should be stimulated throughout the country to meet requirements for long-term development. Further, the development process should be progressed through carbon trading technology, energy structure optimization, and energy consumption efficiency promotion.
Downloads
References
Abbasi, K. R. Shahbaz, M. Jiao, Z. & Tufail, M. (2021). How do energy consumption, industrial growth, urbanization, and CO2 emissions affect economic growth in Pakistan? A novel dynamic ARDL simulations approach. Energy, 221, 119793. https://doi.org/10.1016/j.energy.2021.119793 DOI: https://doi.org/10.1016/j.energy.2021.119793
Acheampong, A. O. Adams, S. & Boateng, E. (2019). Do globalization and renewable energy contribute to carbon emissions mitigation in Sub-Saharan Africa?. Science of the Total Environment, 677, 436-446. https://doi.org/10.1016/j.scitotenv.2019.04.353 DOI: https://doi.org/10.1016/j.scitotenv.2019.04.353
Adams, S. & Nsiah, C. (2019). Reducing carbon dioxide emissions; Does renewable energy matter?. Science of the Total Environment, 693, 133288. https://doi.org/10.1016/j.scitotenv.2019.07.094 DOI: https://doi.org/10.1016/j.scitotenv.2019.07.094
Adebayo, T. S. Awosusi, A. A. Kirikkaleli, D. Akinsola, G. D. & Mwamba, M. N. (2021). Can CO2 emissions and energy consumption determine the economic performance of South Korea? A time series analysis. Environmental Science and Pollution Research, 28(29), 38969-38984. https://doi.org/10.1007/s11356-021-13498-1 DOI: https://doi.org/10.1007/s11356-021-13498-1
Alam, M. M. & Murad, M. W. (2020). The impacts of economic growth, trade openness and technological progress on renewable energy use in organizations for economic co-operation and development countries. Renewable Energy, 145, 382-390. https://doi.org/10.1016/j.renene.2019.06.054 DOI: https://doi.org/10.1016/j.renene.2019.06.054
Ameer, W. Amin, A. & Xu, H. (2022). Does Institutional Quality, Natural Resources, Globalization, and Renewable Energy Contribute to Environmental Pollution in China? Role of Financialization. Frontiers in Public Health, 10. https://doi.org/10.3389/fpubh.2022.849946 DOI: https://doi.org/10.3389/fpubh.2022.849946
Arafat, W. M. G. Haq, I. U. Mehmed, B. Abbas, A. Gamage, S. K. N. & Gasimli, O. (2022). The Causal Nexus among Energy Consumption, Environmental Degradation, Financial Development and Health Outcome: Empirical Study for Pakistan. Energies, 15(5), 1859. https://doi.org/10.3390/en15051859 DOI: https://doi.org/10.3390/en15051859
Atsu, F. Adams, S. & Adjei, J. (2021). ICT, energy consumption, financial development, and environmental degradation in South Africa. Heliyon, 7(7), e07328. https://doi.org/10.1016/j.heliyon.2021.e07328 DOI: https://doi.org/10.1016/j.heliyon.2021.e07328
Ayobamiji, A. A. & Kalmaz, D. B. (2020). Reinvestigating the determinants of environmental degradation in Nigeria. International Journal of Economic Policy in Emerging Economies, 13(1), 52-71. https://doi.org/10.1504/IJEPEE.2020.106680 DOI: https://doi.org/10.1504/IJEPEE.2020.106680
Baydoun, H. & Aga, M. (2021). The Effect of Energy Consumption and Economic Growth on Environmental Sustainability in the GCC Countries: Does Financial Development Matter?. Energies, 14(18), 5897. https://doi.org/10.3390/en14185897 DOI: https://doi.org/10.3390/en14185897
Bui, D. T. (2020). Transmission channels between financial development and CO2 emissions: A global perspective. Heliyon, 6(11), e05509. https://doi.org/10.1016/j.heliyon.2020.e05509 DOI: https://doi.org/10.1016/j.heliyon.2020.e05509
Charfeddine, L. & Kahia, M. (2019). Impact of renewable energy consumption and financial development on CO2 emissions and economic growth in the MENA region: a panel vector autoregressive (PVAR) analysis. Renewable energy, 139, 198-213. https://doi.org/10.1016/j.renene.2019.01.010 DOI: https://doi.org/10.1016/j.renene.2019.01.010
Silva, P. P. D. Cerqueira, P. A. & Ogbe, W. (2018). Determinants of renewable energy growth in Sub-Saharan Africa: Evidence from panel ARDL. Energy, 156, 45-54. https://doi.org/10.1016/j.energy.2018.05.068 DOI: https://doi.org/10.1016/j.energy.2018.05.068
Grossman, G. M. & Krueger, A. B. (1995). Economic growth and the environment. The quarterly journal of economics, 110(2), 353-377. https://doi.org/10.2307/2118443 DOI: https://doi.org/10.2307/2118443
Jalil, A. & Feridun, M. (2011). The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Economics, 33(2), 284-291. https://doi.org/10.1016/j.eneco.2010.10.003 DOI: https://doi.org/10.1016/j.eneco.2010.10.003
Kasman, A. & Duman, Y. S. (2015). CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: a panel data analysis. Economic modeling, 44, 97-103. https://doi.org/10.1016/j.econmod.2014.10.022 DOI: https://doi.org/10.1016/j.econmod.2014.10.022
Khan, S. Khan, M. K. & Muhammad, B. (2021). Impact of financial development and energy consumption on environmental degradation in 184 countries using a dynamic panel model. Environmental Science and Pollution Research, 28(8), 9542-9557. https://doi.org/10.1007/s11356-020-11239-4 DOI: https://doi.org/10.1007/s11356-020-11239-4
Kılavuz, E. & Doğan, İ. (2021). Economic growth, openness, industry and CO2 modeling: are regulatory policies important in Turkish economies?. International Journal of Low-Carbon Technologies, 16(2), 476-487. https://doi.org/10.1093/ijlct/ctaa070 DOI: https://doi.org/10.1093/ijlct/ctaa070
Lv, Z. & Li, S. (2021). How financial development affects CO2 emissions: a spatial econometric analysis. Journal of Environmental Management, 277, 111397. https://doi.org/10.1016/j.jenvman.2020.111397 DOI: https://doi.org/10.1016/j.jenvman.2020.111397
Maheswaranathan, S. (2020) The Relationship between Electric Power Consumption, Foreign Direct Investment and Economic Growth in Sri Lanka, South Asian Journal of Social Studies and Economics6(1), 21-31. https://doi.org/10.9734/sajsse/2020/v6i130158 DOI: https://doi.org/10.9734/sajsse/2020/v6i130158
Murshed, M. Nurmakhanova, M. Elheddad, M. & Ahmed, R. (2020). Value addition in the services sector and its heterogeneous impacts on CO2 emissions: revisiting the EKC hypothesis for the OPEC using panel spatial estimation techniques. Environmental Science and Pollution Research, 27(31), 38951-38973. https://doi.org/10.1007/s11356-020-09593-4 DOI: https://doi.org/10.1007/s11356-020-09593-4
Nurgazina, Z. Ullah, A. Ali, U. Koondhar, M. A. & Lu, Q. (2021). The impact of economic growth, energy consumption, trade openness, and financial development on carbon emissions: empirical evidence from Malaysia. Environmental Science and Pollution Research, 28(42), 60195-60208. https://doi.org/10.1007/s11356-021-14930-2 DOI: https://doi.org/10.1007/s11356-021-14930-2
Omri, A. Daly, S. Rault, C. & Chaibi, A. (2015). Financial development, environmental quality, trade and economic growth: What causes what in MENA countries. Energy Economics, 48, 242-252. https://doi.org/10.1016/j.eneco.2015.01.008 DOI: https://doi.org/10.1016/j.eneco.2015.01.008
Ozcan, B. Tzeremes, P. G. & Tzeremes, N. G. (2020). Energy consumption, economic growth and environmental degradation in OECD countries. Economic Modelling, 84, 203-213. https://doi.org/10.1016/j.econmod.2019.04.010 DOI: https://doi.org/10.1016/j.econmod.2019.04.010
Ozturk, I. & Acaravci, A. (2010). CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews, 14(9), 3220-3225. https://doi.org/10.1016/j.rser.2010.07.005 DOI: https://doi.org/10.1016/j.rser.2010.07.005
Qayyum, M. Ali, M. Nizamani, M. M. Li, S. Yu, Y. & Jahanger, A. (2021). Nexus between financial development, renewable energy consumption, technological innovations and CO2 emissions: the case of India. Energies, 14(15), 4505. https://doi.org/10.3390/en14154505 DOI: https://doi.org/10.3390/en14154505
Rafique, M. Z. Nadeem, A. M. Xia, W. Ikram, M. Shoaib, H. M. & Shahzad, U. (2022). Does economic complexity matter for environmental sustainability? Using ecological footprint as an indicator. Environment, Development and Sustainability, 24(4), 4623-4640. https://doi.org/10.1007/s10668-021-01625-4 DOI: https://doi.org/10.1007/s10668-021-01625-4
Rahman, M. M. & Velayutham, E. (2020). Renewable and non-renewable energy consumption-economic growth nexus: new evidence from South Asia. Renewable Energy, 147, 399-408. https://doi.org/10.1016/j.renene.2019.09.007 DOI: https://doi.org/10.1016/j.renene.2019.09.007
Rajpurohit, S. S. & Sharma, R. (2020). Impact of economic and financial development on carbon emissions: evidence from emerging Asian economies. Management of Environmental Quality: An International Journal. https://doi.org/10.1108/MEQ-03-2020-0043 DOI: https://doi.org/10.1108/MEQ-03-2020-0043
Rasool, H. Malik, M. A. & Tarique, M. (2020). The curvilinear relationship between environmental pollution and economic growth: Evidence from India. International journal of energy sector management. https://doi.org/10.1108/IJESM-04-2019-0017 DOI: https://doi.org/10.1108/IJESM-04-2019-0017
Rjoub, H. Odugbesan, J. A. Adebayo, T. S. & Wong, W. K. (2021). Sustainability of the moderating role of financial development in the determinants of environmental degradation: evidence from Turkey. Sustainability, 13(4), 1844. https://doi.org/10.3390/su13041844 DOI: https://doi.org/10.3390/su13041844
Salari, M. Javid, R. J. & Noghanibehambari, H. (2021). The nexus between CO2 emissions, energy consumption, and economic growth in the US. Economic Analysis and Policy, 69, 182-194. https://doi.org/10.1016/j.eap.2020.12.007
Salari, M. Javid, R. J. & Noghanibehambari, H. (2021). The nexus between CO2 emissions, energy consumption, and economic growth in the US. Economic Analysis and Policy, 69, 182-194. https://doi.org/10.1016/j.eap.2020.12.007 DOI: https://doi.org/10.1016/j.eap.2020.12.007
Saqib, N. (2022). Asymmetric linkages between renewable energy, technological innovation, and carbon dioxide emission in developed economies: non-linear ARDL analysis. Environmental Science and Pollution Research, 1-15. https://doi.org/10.1007/s11356-022-20206-0 DOI: https://doi.org/10.1007/s11356-022-20206-0
Shahbaz, M. Lean, H. H. & Shabbir, M. S. (2012). Environmental Kuznets curve hypothesis in Pakistan: cointegration and Granger causality. Renewable and Sustainable Energy Reviews, 16(5), 2947-2953. https://doi.org/10.1016/j.rser.2012.02.015 DOI: https://doi.org/10.1016/j.rser.2012.02.015
Sharif, A. & Raza, S. A. (2016). The dynamic relationship between urbanization, energy consumption and environmental degradation in Pakistan: Evidence from structure break testing. Journal of Management Sciences, 3(1), 1-21. https://doi.org/10.20547/jms.2014.1603101 DOI: https://doi.org/10.20547/jms.2014.1603101
Shen, Y. Su, Z. W. Malik, M. Y. Umar, M. Khan, Z. & Khan, M. (2021). Does green investment, financial development and natural resources rent limit carbon emissions? A provincial panel analysis of China. Science of The Total Environment, 755, 142538. https://doi.org/10.1016/j.scitotenv.2020.142538 DOI: https://doi.org/10.1016/j.scitotenv.2020.142538
Shobande, O. A. & Ogbeifun, L. (2022). The criticality of financial development and energy consumption for environmental sustainability in OECD countries: evidence from dynamic panel analysis. International Journal of Sustainable Development & World Ecology, 29(2), 153-163. https://doi.org/10.1080/13504509.2021.1934179
Shobande, O. A. & Ogbeifun, L. (2022). The criticality of financial development and energy consumption for environmental sustainability in OECD countries: evidence from dynamic panel analysis. International Journal of Sustainable Development & World Ecology, 29(2), 153-163. https://doi.org/10.1080/13504509.2021.1934179 DOI: https://doi.org/10.1080/13504509.2021.1934179
Su, Z. W. Umar, M. Kirikkaleli, D. & Adebayo, T. S. (2021). Role of political risk to achieve carbon neutrality: Evidence from Brazil. Journal of Environmental Management, 298, 113463. https://doi.org/10.1016/j.jenvman.2021.113463 DOI: https://doi.org/10.1016/j.jenvman.2021.113463
Szymczyk, K. Şahin, D. Bağcı, H. & Kaygın, C. Y. (2021). The effect of energy usage, economic growth, and financial development on CO2 emission management: an analysis of OECD countries with a High environmental performance index. Energies, 14(15), 4671. https://doi.org/10.3390/en14154671 DOI: https://doi.org/10.3390/en14154671
Tamazian, A. Chousa, J. P. & Vadlamannati, K. C. (2009). Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energy Policy, 37(1), 246-253. https://doi.org/10.1016/j.enpol.2008.08.025 DOI: https://doi.org/10.1016/j.enpol.2008.08.025
Usman, M. Makhdum, M. S. A. & Kousar, R. (2021). Does financial inclusion, and renewable and non-renewable energy utilization accelerate ecological footprints and economic growth? Fresh evidence from the 15 highest emitting countries. Sustainable cities and society, 65, 102590. https://doi.org/10.1016/j.scs.2020.102590 DOI: https://doi.org/10.1016/j.scs.2020.102590
Vo, X. V. & Zaman, K. (2020). Relationship between energy demand, financial development, and carbon emissions in a panel of 101 countries: "go the extra mile" for sustainable development. Environmental Science and Pollution Research, 27(18), 23356-23363. https://doi.org/10.1007/s11356-020-08933-8 DOI: https://doi.org/10.1007/s11356-020-08933-8
Yang, Z. Abbas, Q. Hanif, I. Alharthi, M. Taghizadeh-Hesary, F. Aziz, B. & Mohsin, M. (2021). Short-and long-run influence of energy utilization and economic growth on carbon discharge in emerging SREB economies. Renewable Energy, 165, 43-51. https://doi.org/10.1016/j.renene.2020.10.141 DOI: https://doi.org/10.1016/j.renene.2020.10.141
Yu, Y. & Qayyum, M. (2021). Impacts of financial openness on economic complexity: Cross‐country evidence. International Journal of Finance & Economics. https://onlinelibrary.wiley.com/doi/abs/10.1002/ijfe.2491 DOI: https://doi.org/10.1002/ijfe.2491
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Sarojini Maheswaranathan, V. Niranjani, S. Tharshini
This work is licensed under a Creative Commons Attribution 4.0 International License.
With the licence CC-BY, authors retain the copyright, allowing anyone to download, reuse, re-print, modify, distribute, and/or copy their contribution. The work must be properly attributed to its author.
It is not necessary to ask for further permission from the author or journal board.
This journal provides immediate open access to its content on the principle that making research freely available to the public supports a greater global exchange of knowledge.
