Dynamic influence of financial structure, green innovation, urbanization, and trade on consumption-based CO2 emissions in Asian countries

The world economies have environmental sustainability as one of their main concerns. Although numerous studies have been conducted to determine the factors contributing to ecological problems, little has been done to determine the consumption-based CO₂ emission as a sign. The current research focuses on analyzing the factors that define consumption-based CO₂ emissions based on financial growth, innovation of green technology, urbanization and trade openness of Asian nations between 1991 and 2020. We employed CS-ARDL to address the cross-section dependency and heterogeneous slopes in a panel estimation. The outcomes indicate that the overall trend of financial development is that of the rise of carbon emissions, but the application of green technology considerably decreases it. Furthermore, the relationship between the financial development and green innovation assists in neutralizing some of the environmental effects of financial growth. Urbanization and openness to trade, on the other hand, have minimal effect on the CO₂ emissions. The Granger causality tests also point towards the interrelationships between financial structure, industrial activity, green technology and emissions dynamics. The general conclusions imply that the government comes up with effective financial policies that offer financial incentives in encouraging green innovation to mitigate carbon emissions.