The influence of industrial expansion on carbon dioxide emissions in China: The interplay of financial development and renewable energy

Abstract Industrial expansion in China often results in heightened carbon dioxide (CO 2 ) emissions due to manufacturing processes' energy‐intensive nature. Nevertheless, embracing clean technologies driven by renewable energy sources offers a means to counteract these emissions. Through diminishing dependence on carbon‐intensive energy sources, such as coal, renewable energy provides a hopeful avenue for alleviating the environmental repercussions of industrial operations. The study examines how industrial growth, the financial development index and renewable energy affect CO 2 emissions in China from 1980 to 2021, using the linear Autoregressive Distributed Lag (ARDL) approach. It also includes economic growth and non‐renewable energy as explanatory variables. The variables are found to be integrated of order one, and the Fisher‐statistic test indicates a long‐run relationship between them. The long‐run analysis shows that economic growth, renewable energy, and financial development help reduce CO 2 emissions, while non‐renewable energy and industrial value‐added increase them. The effect of the interaction between renewable energies and financial development contributes to emission reduction. This means that the Chinese government is pursuing a financial policy that is synchronized with the use of renewable energies and the promotion of clean technologies.