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Digitalization, Carbon Emissions, and Financial Development

Author

Listed:
  • Morgan Eileen Larick
  • Ficawoyi Donou-Adonsou

    (John Carroll University, USA)

Abstract

We first investigate the association between digitalization and CO2 emissions to evaluate the validity of the Environmental Kuznets Hypothesis. Our findings confirm the presence of an inverted U-shaped relationship, indicating that digitalization initially leads to an increase in CO2 emissions until a certain threshold is reached, beyond which carbon emissions begin to decline. Consequently, countries should adopt distinct policies to mitigate carbon emissions as they undergo the process of digitalization. Subsequently, we explore whether high levels of financial development influence the inverted U-shaped relationship between digitalization and CO2 emissions. While the results suggest that financial development may contribute to reducing emissions in less digitally advanced countries, its impact appears to be less significant in highly digitalized nations.

Suggested Citation

  • Morgan Eileen Larick & Ficawoyi Donou-Adonsou, 2024. "Digitalization, Carbon Emissions, and Financial Development," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 14(1), pages 11-24.
    • Handle: RePEc:afj:journ3:v:14:y:2024:i:1:p:11-24
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-rdfin_v14_n1_a2
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    More about this item

    Keywords

    Digitalization; CO2 emissions; Financial development; Two-stage least squares;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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