Purpose The purpose of this paper is to investigate the long-run effect of financial sector development, energy use and economic growth on carbon emissions for Turkey, in presence of possible regime shifts over a period of 1960-2013. Design/methodology/approach Along with the conventional unit root tests, Zivot-Andrews unit root test with structural break has been employed to check the stationarity of variables. The cointegrating relationship between variables is investigated by using the autoregressive distributed lag bounds test and Hatemi-J threshold cointegration test. Findings The results confirm a cointegrating relationship between the variables. The long-run relationship between the variables has gone through two endogenous structural breaks in 1976 and 1986. Development of financial sector improves environmental quality whereas energy use and economic growth degrade it. The results challenge the validity of environmental Kuznets curve hypothesis in Turkish economy. Research limitations/implications The study uses domestic credit to private sector as a proxy for development of financial sector. The model can be improved by constructing an index of financial development instead of using a single determinant as a proxy for financial development. Practical implications The study may pave the way for policy makers to capture important environmental pollutants in better way and develop effective and efficient energy and economic policies. This may make significant contribution to curbing CO2 emissions while sustaining economic growth. Originality/value This is the only study to examine long-run impact of financial sector development on carbon emissions, using the threshold cointegration approach. Hence, the study is a gentle request to reduce the possible omitted variable econometric estimation bias and fill the gap in the existing literature.

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Purpose This study aims to fill the gap in income-environment literature by adding agricultural contribution to the nexus. The authors investigate the short-run and long-run impact of agricultural contribution, renewable energy consumption, real income, trade liberalisation and urbanisation on carbon emissions for a balanced panel of five South Asian Association for Regional Cooperation (SAARC) countries spanning the period 1990-2013. Design/methodology/approach Pedroni and Kao cointegration techniques have been used to test the existence of long-run relationship between the variables. The directions of causal relationships have been verified using Granger causality tests. Further, the long-run parameters of the baseline equation have been estimated by using the fully modified ordinary least squares, the technique developed by Pedroni, (2001a) for heterogeneous cointegrated panels. Findings The result reveals that agricultural contribution and renewable energy consumption improve environmental quality in the long run, while urbanisation and per capita real income degrade it. The study did not find any evidence of “pollution heaven hypothesis” in the selected countries. The Granger causality tests confirm bidirectional causality between carbon emissions and income and between carbon emissions and urbanisation. In addition, there is unidirectional causality running from agricultural contribution to renewable energy consumption. Originality/value This is the only study to investigate the role of agriculture sector in carbon mitigation from a panel of South Asian economies. To the best of the authors’ knowledge, it is also the first study to test the applicability of “pollution heaven hypothesis” for SAARC countries.

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