Does financial inclusion promote a green economic system? Evaluating the role of energy efficiency

Abstract

There are very few studies on the role of financial inclusion and energy efficiency in promoting a sustainable environment in the existing literature. These studies do not address or link financial inclusion to CO2 emissions in any way. Therefore, the purpose of this study is to look into the role of financial inclusion and energy efficiency on carbon emissions, as well as exports, imports, and gross domestic product (G.D.P.) in the BRICS economies from 1990 to 2020. The study additionally considers the panel data's integration, cointegration, cross-country interdependence, and heterogeneity features, resulting in reliable findings and well-founded policy recommendations. The panel Westerlund cointegration tests confirm the long-run relationships among CO2 emissions, financial inclusion, energy efficiency, exports, imports, and G.D.P. Furthermore, the long and short-run outcomes of CS-ARDL revealed that financial inclusion, imports size, and G.D.P. raise CO2 emissions, while energy efficiency and exports size reduce CO2 emissions. The study proposes increasing financial inclusion for controlling pollution and achieving sustainable environmental goals in light of these findings. Public-sector efforts are needed to integrate financial inclusion goals with continued improvements in energy efficiency and environmental policies.