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Do climate technology, financialization, and sustainable finance impede environmental challenges? Evidence from G10 economies

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  • Li, Qingtao
  • Sharif, Arshian
  • Razzaq, Asif
  • Yu, Yangyu

Abstract

Climate technologies and sustainable finance are imperative to ensure green growth agenda. Though there exists literature, however, little is known regarding the distinct influence of financial development and green finance in the framework of climate tech. This study examines the relevance of climate technologies, financialization (financial market efficiency and financial institutions' access), and sustainable finance in G10 countries. The initial findings confirm a long-run cointegrating relationship between model variables and highlight the issues of cross-sectional dependence and slope heterogeneity. Therefore, we employ the Cross-Sectional Augmented ARDL model and find that climate technologies, financial institutions' access, and green bonds (financial market efficiency) significantly decrease (increase) carbon emissions. Manifestly, the marginal contribution of climate technologies is higher towards emissions reduction, followed by green financing. Similar outcomes are observed in the short run; nevertheless, the coefficient magnitudes are relatively lower. The stability of the model is also confirmed through significant and negative error correction terms, implying a substantial convergence towards steady-state equilibrium in case of any deviation. These results are also validated by alternative estimators and offer valuable policy recommendations.

Suggested Citation

  • Li, Qingtao & Sharif, Arshian & Razzaq, Asif & Yu, Yangyu, 2022. "Do climate technology, financialization, and sustainable finance impede environmental challenges? Evidence from G10 economies," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:tefoso:v:185:y:2022:i:c:s0040162522006163
    DOI: 10.1016/j.techfore.2022.122095
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