IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2024-06-69.html
   My bibliography  Save this article

Islamic Finance and Environmental Sustainability: Empirical Insight from OIC Countries

Author

Listed:
  • Mohammad Iqbal Irfany

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Annisa Dwi Utami

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Deni Lubis

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Fiona Ramadhini

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Lalacitra Fitri Suwari

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Nisrina Rafelia Maula

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Fitriyatustany Fitriyatustany

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

  • Daffa Aqomal Haq

    (Faculty of Economics and Management, IPB University, Bogor, Indonesia.)

Abstract

Environmental degradation remains a significant global challenge, particularly in the Organization of Islamic Cooperation (OIC) countries. This study primarily examines the impact of Islamic finance, proxied by two indicators, namely Islamic financial assets and Islamic banking financing, and other variables including Gross Domestic Product (GDP), Foreign Direct Investment (FDI), urbanization, renewable energy adoption, and forest area, on CO2 emissions. This study revealed that Islamic financial assets had a negative impact on CO2 emissions, highlighting their importance in supporting green investments and sustainability. However, Islamic banking financing has little influence on emissions reduction, most likely due to carbon-intensive initiatives. Furthermore, GDP growth increases emissions, although FDI, urbanization, and forest areas help to lower them. These findings underscore Islamic finance's critical role in fostering sustainable development, as well as the necessity for better green Islamic financing policies in OIC member nations. The findings also provide important insights for policymakers working to balance economic growth with environmental sustainability in Islamic finance.

Suggested Citation

  • Mohammad Iqbal Irfany & Annisa Dwi Utami & Deni Lubis & Fiona Ramadhini & Lalacitra Fitri Suwari & Nisrina Rafelia Maula & Fitriyatustany Fitriyatustany & Daffa Aqomal Haq, 2024. "Islamic Finance and Environmental Sustainability: Empirical Insight from OIC Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 707-715, November.
    • Handle: RePEc:eco:journ2:2024-06-69
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/17400/8402
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/17400
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Udemba, Edmund Ntom & Yalçıntaş, Selin, 2021. "Interacting force of foreign direct invest (FDI), natural resource and economic growth in determining environmental performance: A nonlinear autoregressive distributed lag (NARDL) approach," Resources Policy, Elsevier, vol. 73(C).
    2. Siswantoro & Amir Mahmud, 2023. "The impact of Islamic financial development on renewable energy production in Islamic countries," Asian Journal of Islamic Management (AJIM), Center for Islamic Economics and Development Studies [P3EI], vol. 5(1), pages 54-68.
    3. Laura Aibolovna Kuanova & Rimma Sagiyeva & Nasim Shah Shirazi, 2021. "Islamic social finance: a literature review and future research directions," Journal of Islamic Accounting and Business Research, Emerald Group Publishing Limited, vol. 12(5), pages 707-728, July.
    4. Wang, Wei-Zheng & Liu, Lan-Cui & Liao, Hua & Wei, Yi-Ming, 2021. "Impacts of urbanization on carbon emissions: An empirical analysis from OECD countries," Energy Policy, Elsevier, vol. 151(C).
    5. Mohammed Musah & Yusheng Kong & Isaac Adjei Mensah & Stephen Kwadwo Antwi & Mary Donkor, 2021. "The connection between urbanization and carbon emissions: a panel evidence from West Africa," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(8), pages 11525-11552, August.
    6. Oriza Candra & Abdeljelil Chammam & José Ricardo Nuñez Alvarez & Iskandar Muda & Hikmet Ş. Aybar, 2023. "The Impact of Renewable Energy Sources on the Sustainable Development of the Economy and Greenhouse Gas Emissions," Sustainability, MDPI, vol. 15(3), pages 1-11, January.
    7. Nisful Laila & Aam S. Rusydiana & Muhamad Iqbal Irfany & Imron HR & Popon Srisusilawati & Muhamad Taqi, 2021. "Energy Economics in Islamic Countries: A Bibliometric Review," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 88-95.
    8. Mohammad Iqbal Irfany & Muhamad Mulya Tarmizi & Resfa Fitri & Neneng Hasanah, 2022. "Development and Climate Change in OIC Countries: Examining Causality between Economic Development, Energy Consumption, and Emissions," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 61-66, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahakwa, Isaac & Xu, Yi & Tackie, Evelyn Agba, 2023. "Greening human capital towards environmental quality in Ghana: Insight from the novel dynamic ARDL simulation approach," Energy Policy, Elsevier, vol. 176(C).
    2. Juan Pablo Vallejo Mata & María Gabriela González Bautista & Luis Eduardo Solis Granda & Eduardo Germán Zurita Moreano, 2024. "Evaluating the Environmental Kuznets Curve: The Role of Renewable Energy, Economic Growth, Urban Density and Trade Openness on CO2 Emissions. An Analysis for High-Income Countries Using the CS-ARDL Mo," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 580-596, November.
    3. Licong Xing & Edmund Ntom Udemba & Merve Tosun & Ibrahim Abdallah & Imed Boukhris, 2023. "Sustainable development policies of renewable energy and technological innovation toward climate and sustainable development goals," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(2), pages 1178-1192, April.
    4. Qianxiao Zhang & Syed Asif Ali Naqvi & Syed Ale Raza Shah, 2021. "The Contribution of Outward Foreign Direct Investment, Human Well-Being, and Technology toward a Sustainable Environment," Sustainability, MDPI, vol. 13(20), pages 1-29, October.
    5. Shixiong Song & Siyuan Zhao & Ye Zhang & Yongxi Ma, 2023. "Carbon Emissions from Agricultural Inputs in China over the Past Three Decades," Agriculture, MDPI, vol. 13(5), pages 1-12, April.
    6. Wei Wang & Leonid Melnyk & Oleksandra Kubatko & Bohdan Kovalov & Luc Hens, 2023. "Economic and Technological Efficiency of Renewable Energy Technologies Implementation," Sustainability, MDPI, vol. 15(11), pages 1-19, May.
    7. Wilman-Santiago Ochoa-Moreno & Byron Alejandro Quito & Carlos Andrés Moreno-Hurtado, 2021. "Foreign Direct Investment and Environmental Quality: Revisiting the EKC in Latin American Countries," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    8. Abudureheman, Maliyamu & Jiang, Qingzhe & Dong, Xiucheng & Dong, Cong, 2022. "Spatial effects of dynamic comprehensive energy efficiency on CO2 reduction in China," Energy Policy, Elsevier, vol. 166(C).
    9. Murshed, Muntasir & Saboori, Behnaz & Madaleno, Mara & Wang, Hong & Doğan, Buhari, 2022. "Exploring the nexuses between nuclear energy, renewable energy, and carbon dioxide emissions: The role of economic complexity in the G7 countries," Renewable Energy, Elsevier, vol. 190(C), pages 664-674.
    10. Janusz Myszczyszyn & Błażej Suproń, 2022. "Relationship among Economic Growth, Energy Consumption, CO 2 Emission, and Urbanization: An Econometric Perspective Analysis," Energies, MDPI, vol. 15(24), pages 1-18, December.
    11. Zhang, HongWei & Ben, Fang & Qin, Meng, 2024. "Mineral resources, tourism, human capital, and carbon neutrality: A path towards balanced and sustainable development," Resources Policy, Elsevier, vol. 90(C).
    12. Muhammad Sadiq & Syed Tauseef Hassan & Irfan Khan & Mohammad Mafizur Rahman, 2024. "Policy uncertainty, renewable energy, corruption and CO2 emissions nexus in BRICS-1 countries: a panel CS-ARDL approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 21595-21621, August.
    13. Farrukh Nawaz Kayani & Ismat Nasim & Khalil Abu Saleem, 2024. "Analyzing the Impact of Governance, Environment and Trade on Inward FDI: A Case of Cambodia, Thailand and Vietnam from ASEAN," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 523-534, March.
    14. Appiah, Michael & Li, Mingxing & Sehrish, Saba & Abaji, Emad Eddin, 2023. "Investigating the connections between innovation, natural resource extraction, and environmental pollution in OECD nations; examining the role of capital formation," Resources Policy, Elsevier, vol. 81(C).
    15. Suddin Lada & Brahim Chekima & Rudy Ansar & Mohamad Isa Abdul Jalil & Lim Ming Fook & Caroline Geetha & Mohamed Bouteraa & Mohd Rahimie Abdul Karim, 2023. "Islamic Economy and Sustainability: A Bibliometric Analysis Using R," Sustainability, MDPI, vol. 15(6), pages 1-21, March.
    16. Huang, Xiaoyong & Yu, Cong & Chen, Yunping & Jia, Fei & Xu, Xiangyun, 2022. "Rigid payment breaking, default spread and yields of Chinese treasury bonds," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    17. Ke Xu & Rui Zhang & Yun Tong, 2024. "The Impact of High-Standard Scenic Areas Construction on County-Level Carbon Emissions and Its Spatial Spillover Effects: Evidence from a Quasi-Natural Experiment," Land, MDPI, vol. 13(11), pages 1-19, November.
    18. Shah, Syed Ale Raza & Zhang, Qianxiao & Abbas, Jaffar & Balsalobre-Lorente, Daniel & Pilař, Ladislav, 2023. "Technology, Urbanization and Natural Gas Supply Matter for Carbon Neutrality: A New Evidence of Environmental Sustainability under the Prism of COP26," Resources Policy, Elsevier, vol. 82(C).
    19. Jiang, Qichuan & Ma, Xuejiao, 2021. "Spillovers of environmental regulation on carbon emissions network," Technological Forecasting and Social Change, Elsevier, vol. 169(C).
    20. Du, Gang & Li, Wendi, 2022. "Does innovative city building promote green logistics efficiency? Evidence from a quasi-natural experiment with 285 cities," Energy Economics, Elsevier, vol. 114(C).

    More about this item

    Keywords

    Islamic finance; CO2 emissions; environmental sustainability; renewable energy; OIC countries;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2024-06-69. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.