Exploring the effects of climate-related financial policies on carbon emissions in G20 countries: a panel quantile regression approach

Abstract

This paper studies the effects of financial development, economic growth, and climate-related financial policies on carbon emissions for G20 countries. The focus is particularly on financial policies implemented to scale up green finance and address climate-related financial risks from 2000 to 2017 and represent this paper’s value added. The empirical results obtained by relying on the panel quantile regression approach indicate that the impacts of the different explanatory variables on carbon emission are heterogeneous. Specifically, the effect of the stock of short-term financial policies on carbon emissions is negative, and its effect becomes smaller at higher quantiles. The stock of long-term policies also shows significant negative coefficients, but its impact is stronger for higher quantiles. No significance is reported for the lowest quantile. Financial development contributes to improving environmental quality, and its impact is larger in higher emission countries. Energy consumption increases carbon emissions, with the strongest effects occurring at higher quantiles. Our results also support the validity of the EKC relationship and positive effects of GDP and population on high carbon emissions levels. Estimation results are robust to alternative model specifications and after controlling for the role played by adopting international climate change mitigation policies as proxied by the adoption of the Kyoto Protocol.

Effects of Fiscal and Monetary Policies, Energy Consumption and Economic Growth on CO2 Emissions in the Turkish Economy: Nonlinear Bootstrapping NARDL and Nonlinear Causality Methods

“…It has been demonstrated that achieving an effective decrease in emissions requires central bank independence and a reduction in governmental influence over central banks [43]. By examining the roles of climate-related green financial policy instruments with panel quantile regressions on CO2e, the significance of financial development and the positive effects of EC on CO2e in the higher quantiles are highlighted [44]. With their findings, D'Orazio and Dirks demonstrate that green financial instruments have negative coefficient estimates in the long-and short-term, therefore reducing CO2e [44].…”

Impact of banking development and renewable energy consumption on environmental sustainability in Germany: Novel findings using the bootstrap ARDL approach

“…Although the traditional EKC approach has focused on the link between economic development and ecological pollution, several empirical studies have assessed the role of energy within the EKC framework [ 1 , 2 , 7 , 29 , 30 ]. According to these studies, energy utilisation is the primary driver of climate change, suggesting that traditional energy systems such as fossil fuel (oil, gas and gas) positively affect CO 2 emissions, whereas green energy negatively affects CO 2 emissions.…”

“…Increasing ecological pollution is one of the most significant and pressing challenges confronting the planet [ 1 ]. This issue has become a priority, multiple protocols have been implemented and meetings have been organised to mitigate ecological pollution, such as the Kyoto Protocol and the 2015 Paris Agreement [ 2 ].…”

A global database for climate-related financial policies

“…The database permits the construction of the CRFP index to assess, quantify, and compare international engagement to climate-related financial policymaking in recent decades [ 3 ] and the analysis of pandemic and climate change threats in the prudential regulatory frameworks of G20 countries [ 4 ]. Moreover, the different indicators of Policy Areas contained in the database have been used to investigate whether these policies contribute to the reduction of CO2 emission in G20 countries [ 5 ], to study the empirical link between the climate-related financial policies and the central bank and/or financial regulators governance structure [ 6 ] and which factors influence the decision to adopt climate-related financial policies [ 7 ].…”

“…Existing data do not allow for assessing the effectiveness of climate-related financial policies. D’Orazio and Dirks [ 5 ], have made the first contribution in this direction by examining whether the implementation of climate-related financial policies resulted in CO2 emissions reductions in G20 countries. However, more data and information, particularly for some nations, would be required to conduct a more thorough study of the amount of financial resources mobilized by the policies included in the index.…”