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Do financial markets mitigate CO 2 emissions worldwide? Modelling under dynamic panel data

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  • Indranarain Ramlall

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.

Suggested Citation

  • Indranarain Ramlall, 2016. "Do financial markets mitigate CO 2 emissions worldwide? Modelling under dynamic panel data," International Journal of Green Economics, Inderscience Enterprises Ltd, vol. 10(2), pages 107-118.
    • Handle: RePEc:ids:ijgrec:v:10:y:2016:i:2:p:107-118
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    Cited by:

    1. Sinha, Avik, 2018. "Impact of ICT exports and internet usage on carbon emissions: A case of OECD countries," MPRA Paper 103716, University Library of Munich, Germany, revised 2018.
    2. Sinha, Avik, 2017. "Examination of oil import-exchange nexus for India after currency crisis," MPRA Paper 100359, University Library of Munich, Germany, revised 2017.

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