Can green finance and innovations promote environmental sustainability: empirical evidence from India

Purpose This study aims to explore the impact of green finance, economic growth (EG), innovation and energy intensity on carbon emissions in India. Due to the severe climate conditions, environmental protection has become a major concern worldwide which needs the attention of policymakers and researchers. Design/methodology/approach This present study uses India’s time series data from 2000 to 2020. Auto regressive distributed lags cross-sectional autoregressive distributed lag (ARDL)-bound testing technique is used to study the association between key variables and carbon emissions. The Granger causality test is also applied to test the both-sided link between variables. Findings The ARDL-bound test confirms the long-run relationship between the selected variables. The empirical result of this study reveals that green finance and innovation enhance environmental quality through carbon emissions reduction as both variables show a significant negative result in the long run. However, EG and higher energy intensity contribute to environmental degradation as both variables show a significant and positive result in the long run. The Granger causality test showed unidirectional causality between carbon emission and green finance, EG and carbon emission, energy intensity and carbon emission and bidirectional causality between innovation and green finance. Originality/value This study’s results imply that a long-run relationship exists between the key variables and carbon emissions in India. Green finance and innovation can facilitate sustainable growth in India by reducing carbon emissions. Based on empirical findings this study provides recommendations to policymakers and industrial sectors.