HOW MUCH DO FINANCIAL INDICATORS CONTRIBUTE TO RESOURCE CONSUMPTION AND ENVIRONMENTAL SUSTAINABILITY IN CHINA?

This study examines how financial development, GDP, the Shanghai Composite Index, and crude oil prices affect coal consumption and CO2 emissions in China from 1992 to 2022. We highlight the importance of financial development as a key driver of GDP in emerging economies and its connection to energy use and environmental issues. Employing two different Autoregressive Distributed Lag (ARDL) models, our results show that crude oil prices, financial development, and GDP have a positive effect on coal consumption. However, the previous year’s financial development and the Shanghai Composite Index are linked to higher CO2 emissions over the long term. These findings suggest that increased energy demand from economic growth leads to more coal use, and as financial development progresses, it can boost industrial activities that further increase this demand. Additionally, the error correction model shows that about 28.26% of short-term imbalances in CO2 emissions are corrected each year, while 14.74% of coal consumption imbalances return to their long-term balance annually. These findings emphasize the stability of CO2 emissions and coal consumption systems, highlighting the need for sustainable policies to address the environmental challenges posed by financial development and energy use in China.