Modelling the Linkages between Financial Development, Economic Growth, Energy Use, Globalization and Carbon Dioxide Emissions: Evidence from BRICS Countries

This research empirically investigates the relationship between financial development, economic growth, energy consumption, globalization and carbon emissions in Brazil, Russia, India, China, and South Africa (BRICS countries). The study utilizes annual panel data retrieved from World Bank, Swiss Economic Institute, and International Energy Agency for the period 1990-2022. A range of econometric techniques robust to heterogeneity and cross-sectional dependence is employed in the analysis. The empirical estimation methods employed in the analysis include Breusch and Pesaran cross-sectional dependence tests, the Pesaran panel unit root test, and the Pooled Mean Group (PMG)/ Auto-Regressive Distributed Lag (ARDL) model, developed by Pesaran and Smith. The findings reveal that economic growth, energy consumption, and economic globalization have a long-run positive and significant relationship with CO2 emissions. In contrast, a long-run negative and significant relationship between political globalization, social globalization and CO2 emissions is observed. Moreover, the financial development is negatively co-integrated with CO2 emissions in the long run. These results suggest that the economic and political aspects of globalization have a profound impact on the environment. Therefore, governments and policymakers in BRICS countries should formulate environmentally sustainable policies that carefully consider the effects of globalization on carbon emissions.