Strengthening climate prevention through economic globalization, clean energy, and financial development in N11 countries: evidence from advance panel estimations

Abstract

This study evaluates the relevancy of economic globalization, financial development, and clean energy, in strengthening the environmental sustainability of the next 11 economies over a time period pertaining to 1995–2018. In order to achieve the objective of this study, the advanced panel estimation techniques of unit root testing, and the cointegration analysis have been applied due to the presence of the cross-sectional-dependence and heterogeneity of the slope parameters in the panel data. The long-run output coefficients have been estimated through the Cross-Sectional Autoregressive Distributive Lag Model (CS-ARDL). Moreover, the causality test for a heterogeneous panel has also been employed in order to determine the causal relationships among the variables that are under study. Our empirical findings of these tests indicate that financial development and economic globalization tend to contribute to the deterioration of environmental quality, but clean energy is productive for its improvement. The bi-directional causal relationship is recognized to exist between CO2 emission and all the variables. Based on these findings, the study recommends adopting economic growth policies that are aligned with the defined environmental regulations, thus promoting the use of more clean energy resources. These include resources such as renewable energy and incorporating the environmental welfare goals into financial development plans in N11 economies.