Revisiting Emissions: How Economic Structure, Financial Development, Urbanisation, Trade Openness, and Natural Resource Rent Shape CO2 and N2O

Achieving zero carbon emissions is crucial for mitigating climate change and meeting global targets. This study examines the economic and financial drivers of carbon dioxide (CO2) and nitrous oxide (N2O) emissions using a panel dataset of 141 developed and developing countries from 1990 to 2020. Employing the generalised method of moments (GMM), the findings indicate that industrial and manufactural activities remain the dominant source of CO2 emissions, particularly in developed economies, while agriculture is a major contributor to N2O emissions, especially in developing countries. While the service sector reduces both emissions, the effect is more pronounced for CO2 than for N2O. Urbanisation, trade openness, and natural resource rents also positively correlate with emissions. However, financial development presents a dual effect, offering the potential for emissions reduction through green financing. These insights underscore the need for targeted policies, including stricter industrial regulations, sustainable agricultural practices, green urban planning, and financial strategies that support low-carbon transitions.