The dynamic nexus among financial development, renewable energy and carbon emissions: Moderating roles of globalization and institutional quality across BRI countries

Belt and Road (BRI) countries are trying to realize the potential of financial resources and renewable energy in order to mitigate the effects of carbon dioxide (CO2) emissions and to attain the Sustainable Development Goals (SDGs). However, prevailing structural issues have been found to stymie the environmental outcome. This issue calls for a policy reorientation in the BRI countries, and therein lies the role of the present study. This study examines how the environmental impacts of financial development and renewable energy respond to exogenous moderation. Using a second-generation methodological approach on the data of the 64 BRI countries over 2003-2019, findings reveal that globalization enhances the negative environmental externality exerted by financial development, while institutional quality suppresses it. Both globalization and institutional quality augment the positive environmental externalities exerted by renewable energy and human capital. Using dynamic elasticity measures, the evolutionary impacts of the moderators are also captured. An SDG-oriented policy framework is recommended based on the study outcomes.

Automated summary

This study examines the environmental impacts of financial development and renewable energy in Belt and Road Initiative (BRI) countries and finds that globalization exacerbates the negative environmental effects of financial development, while institutional quality can mitigate them. Additionally, both globalization and institutional quality enhance the positive environmental impacts of renewable energy and human capital. The study recommends an SDG-oriented policy framework based on the research findings.