The effect of the Fourth Industrial Revolution on the environment: The relationship between electronic finance and pollution in OECD countries

Abstract

It is indisputable that the Fourth Industrial Revolution has reshaped the way we live, work, and interact. The information and technology (IT) age has led to radical economic changes in both the relationships between individuals, companies, and governments and in the environment they exist in. Currently, electronic finance (e-finance) and environmental quality are critical issues that have received significant research attention in the form of climate change adaptation and mitigation strategies. With this in mind, this study aims to investigate the impact of e-finance on CO2 emissions. The study crafts a model with numerous control variables, including renewable and non-renewable energy consumption, urbanisation, manufacturing, and an environmental Kuznets curve (EKC) for the 29 OECD countries from 2007 to 2016. Fixed and random effects models of panel data are employed to control for the possible heterogeneity between countries. In addition, the study uses an instrumental variable estimation approach and a Canay(2011) panel quantile regression as a robustness check. The main results reveal that e-finance reduces CO2 emissions in Organisation for Economic Cooperation and Development (OECD) countries and leads to a lower pollution rate. The paper also finds that the EKC hypothesis holds. These findings have several important policy implications for OECD countries, and the model may be extended to investigate similar issues in developing economies.