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The power of financial innovation in neutralizing carbon emissions: the case of mobile money in Somalia

Author

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  • Abdinur Ali Mohamed

    (SIMAD University)

  • Fartun Ahmed Sheikh Mohamud

    (SIMAD University)

Abstract

Financial innovation is a crucial component of financial sector development that impacts economic well-being. This study examines the causal link between mobile money and carbon emissions in Somalia to determine the link between financial innovation and carbon emissions. This study used quarterly data from 2010 to 2020 and the bound cointegration and Johansen methods to investigate the cointegration between variables. This study uses an autoregressive distributed model to estimate the model’s short-run dynamics and long-term effects. Carbon emission is the dependent variable, while energy consumption, affluence, mobile money, population growth, and urbanization are the explanatory variables. This study reveals that mobile money and affluence reduce carbon emissions in the short and long run. Moreover, although population growth and urbanization are positively related to carbon emissions in the long run, their short-run impacts on carbon emissions are insignificant. The study also revealed that energy consumption insignificantly affects carbon emissions in the short and long run. Urbanization is the dominant factor contributing to carbon emissions, whereas mobile money effectively reduces carbon emissions. Our results imply that mobile money is instrumental in providing financial services such as insurance, credit savings, remittances, and government transfers to people dealing with environmental realities.

Suggested Citation

  • Abdinur Ali Mohamed & Fartun Ahmed Sheikh Mohamud, 2024. "The power of financial innovation in neutralizing carbon emissions: the case of mobile money in Somalia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 23151-23174, September.
    • Handle: RePEc:spr:endesu:v:26:y:2024:i:9:d:10.1007_s10668-023-03594-2
    DOI: 10.1007/s10668-023-03594-2
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