Exploring the dynamic relationship between financial development, renewable energy, and carbon emissions: A new evidence from belt and road countries.

This empirical study examines the endogenous relationship between carbon emissions (CO2), financial development, renewable energy, globalization, and institutional quality in 64 belt and road initiative countries (BRI) using a two-step system generalized method of moments (GMM) approach with panel data over the period 2003 to 2018. Furthermore, this study used (Dumitrescu & Hurlin, 2012) causality test to estimate the variables' causal relationship. The results indicate that financial development significantly increases CO2 emissions and causes environmental degradation in BRI countries. However, renewable energy and globalization mitigate CO2 emissions and improve the quality of the environment. Institutional quality was positive in correlation with CO2 emission and indicates bad governance, corruption, weak bureaucracy, and improper implementation of environmental laws cause environmental degradation. Further, the study also reports a bidirectional relationship of financial development, renewable energy, and institutional quality with CO2 emissions and a unidirectional causality running from globalization to CO2 emissions in BRI countries. This study offers policymakers insight into restructuring the financial system, energy consumption pattern, and global integration and improving institutions' quality for a sustainable environment and the economy at the national and regional levels.