Achieving Carbon-Neutrality in MENA Countries: Does Financial Inclusion Matter?

Abstract

This study examines the relationship between financial inclusion, renewable energy, and CO2 emissions using data from 11 Middle East and North Africa (MENA) countries from 2004 to 2019. Evidence from fixed effects-ordinary least squares (FE-OLS), dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS), and canonical correlation regression (CRR) showed that financial inclusion contributes significantly to decarbonization. Country-specific analysis indicated that financial inclusion is associated with mitigating CO2 emissions in Egypt, Israel, Qatar, and Tunisia while significantly spurring CO2 emissions in Algeria, Lebanon, and Saudi Arabia. In addition, renewable energy contributes significantly to decarbonization in MENA, especially in Algeria, Lebanon, Tunisia, and Turkey. We recommend that policies promoting financial inclusion and renewable energy usage would contribute to the attainment of the carbon-neutrality goal by MENA countries.