Does natural resource rent and financial inclusion curb carbon emissions? Empirical evidence from E7 and G7 economies

Abstract The study here analyzes the linkage between natural resource rent (NRR), financial inclusion, and carbon emissions taking foreign direct investment (FDI) and institutional quality as control variables in the emerging (E7) and developed (G7) economies during 2004–2021. Fully modified ordinary least squares (FMOLS) techniques and dynamic ordinary least squares (DOLS) are applied for estimating the model and the method of moments quantile regression (MMQR) is used for checking the robustness of the results. Findings indicated that NRR depicted a positive impact on carbon emissions in both emerging and developed economies and financial inclusion showed a negative impact on carbon emissions in emerging economies but lacked statistical significance with respect to developed economies. FDI inflows depicted a positive impact on carbon emissions with respect to all the economies taken together and with respect to institutional quality there was a varied impact of institutional factors on carbon emissions in both E7 and G7 nations. In order to lower carbon emissions, the policymakers should prioritize the establishment of regulatory frameworks that promote the delivery of sustainable financial services. They should focus on the enhancement of institutional quality and reduce the dependence on resource rents derived from fossil fuels.