Circumventing environmental degradation with low-carbon energy and green finance: the case of the Latin American economies

Abstract Green technological innovation and low-carbon energy systems emerge as the fundamental drivers toward meeting global climate challenges. By employing this two-pronged approach, mechanisms and policy actions that advances the ‘Sustainable Development Goal’ 13 of climate action are developed. Annual data of the Latin American countries are employed, for the time spanning from 1996 to 2022. Data are analyzed with the ‘Method of Moments Quantile Regression,’ ‘Panel Correlated Standard Errors,’ and Driscoll–Kraay methods. Key findings show that low-carbon energy and green finance significantly improve ecological quality, while natural resources rents, digital technology, and financial development reduce it. The synergies of low-carbon energy with financial development and green finance foster environmental sustainability, while the synergies of natural resources rents and digital technology are detrimental. This study provides novel empirical evidence on how low-carbon energy and green finance jointly influence ecological quality in Latin America, using advanced second-generation panel techniques. Beyond confirming the environmental benefits of renewable and nuclear energy, the findings clarify the asymmetric role of financial development and digitalization, offering policy-relevant insights aligned with Sustainable Development Goal-13. The findings of this research support the theories of sustainability that recommends the maintenance of non-declining level of natural resources for sustainable development. Key policies recommend capitalizing on green finance and financial development in generating renewable resources for sustainable futures.