Abstract
This study examines the connection between economic policy uncertainty (EPU), CO2 emissions, and financial inclusion in developed and develo** countries. Using the data from 2004 to 2021, advanced statistical techniques are employed, including Sobel test, to explore the mediating effect of financial inclusion on the relationship between economic policy uncertainty (EPU) and CO2 emissions. There is a dearth of research examining these three variables together in a single study. Similarly, using financial inclusion as a mediator in the relation of EPU and CO2 emissions is a novel concept. This article employs a multi-indicator approach to measure key variables like CO2 emissions and financial inclusion. The results indicate that uncertainties in economic policies contribute in practices that lead to higher CO2 emissions in overall panel data of 44 countries. In addition, when considering the relationship between EPU and FI, the results indicate a significant and negative relationship between EPU and FI. If there is uncertainty in economic policies, it may lead toward challenges and hurdles in financial inclusion. When the mediating affect was checked, it was found financial inclusion acts as a significant mediator in the relationship between EPU and CO2 emissions, depicting that financial inclusion fosters the environmental quality and mitigates the potential harmful effects of environmental aspects of economic policy uncertainty. Therefore, policies that promote financial inclusion should be given top priority by governments, particularly in emerging nations. Financial literacy and bank service accessibility should be promoted. These measures would lessen the impact of staggering economic policies on CO2 emissions. It is necessary for policymakers to include environmental factors, specifically those relating to carbon emissions, into economic strategies. This requires encouraging industries to adopt eco-friendly practices and coordinating economic strategies with sustainability objectives.
References
Abdul Karim Z, Nizam R, Law SH, Hassan MK (2022) Does financial inclusiveness affect economic growth? New evidence using a dynamic panel threshold regression. Financ Res Lett 46:102364. https://doi.org/10.1016/j.frl.2021.102364
Adedoyin FF, Zakari A (2020) Energy consumption, economic expansion, and CO2 emission in the UK: the role of economic policy uncertainty. Sci Total Environ 738:140014. https://doi.org/10.1016/j.scitotenv.2020.140014
Adeneye Y, Rasheed S, Ooi SK (2023) Does financial inclusion spur CO2 emissions? The marginal effects of financial sustainability. IIMBG J Sustain Bus Innov 1:77–97. https://doi.org/10.1108/ijsbi-02-2023-0004
Alenoghena RO (2017) Financial Inclusion and per Capita Income in Africa: Bayesian Var Estimates. In: Questa Soft. https://www.ceeol.com/search/article-detail?id=729930
Allam Z, Bibri SE, Sharpe SA (2022) The rising impacts of the COVID-19 pandemic and the Russia-Ukraine War: energy transition, climate justice, global inequality, and supply chain disruption. Resources 11:99. https://doi.org/10.3390/resources11110099
Anser MK, Syed QR, Lean HH et al (2021) Do economic policy uncertainty and geopolitical risk lead to environmental degradation? Evidence from emerging economies. Sustainability 13:5866. https://doi.org/10.3390/su13115866
Arshad A (2022) Impact of financial inclusion on food security: evidence from develo** countries. Int J Soc Econ 49:336–355. https://doi.org/10.1108/ijse-08-2021-0462
Arshad A, Parveen S (2023) Exploring the impact of financial inclusion on greenhouse gas emissions (CO2) and energy efficiency: evidence from develo** countries. Environ Dev Sustain. https://doi.org/10.1007/s10668-023-03780-2
Arun T, Kamath R (2015) Financial inclusion: policies and practices. IIMB Manag Rev 27:215. https://doi.org/10.1016/j.iimb.2015.10.007
Baker SR, Bloom N, Davis SJ (2016) Measuring economic policy uncertainty. SSRN Electron J. https://doi.org/10.2139/ssrn.2198490
Baron RM, Kenny DA (1986) The moderator–mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. J Pers Soc Psychol 51:1173–1182. https://doi.org/10.1037/0022-3514.51.6.1173
Benlemlih M, Yavaş ÇV (2023) Economic policy uncertainty and climate change: evidence from CO2 emission. J Bus Ethics. https://doi.org/10.1007/s10551-023-05389-x
Bilgili F, Koçak E, Bulut Ü (2016) The dynamic impact of renewable energy consumption on CO 2 emissions: a revisited environmental Kuznets curve approach. Renew Sustain Energy Rev 54:838–845. https://doi.org/10.1016/j.rser.2015.10.080
Bryan BA (2013) Incentives, land use, and ecosystem services: synthesizing complex linkages. Environ Sci Policy 27:124–134. https://doi.org/10.1016/j.envsci.2012.12.010
Caglar AE (2022) Can nuclear energy technology budgets pave the way for a transition toward low-carbon economy: insights from the United Kingdom. Sustain Dev 31:198–210. https://doi.org/10.1002/sd.2383
Cai X, Wei C (2023) Does financial inclusion and renewable energy impede environmental quality: empirical evidence from BRI countries. Renew Energy 209:481–490. https://doi.org/10.1016/j.renene.2023.04.009
Chaffin BC, Gunderson LH (2016) Emergence, institutionalization and renewal: rhythms of adaptive governance in complex social-ecological systems. J Environ Manag 165:81–87. https://doi.org/10.1016/j.jenvman.2015.09.003
Chang L, Qian C, Dilanchiev A (2022) Nexus between financial development and renewable energy: empirical evidence from nonlinear autoregression distributed lag. Renew Energy 193:475–483. https://doi.org/10.1016/j.renene.2022.04.160
Chen Y, Yang S, Li Q (2022) How does the development of digital financial inclusion affect the total factor productivity of listed companies? Evidence from China. Finance Res Lett 47:102956. https://doi.org/10.1016/j.frl.2022.102956
Chu LK, Doğan B, Dung HP et al (2023) A step towards ecological sustainability: how do productive capacity, green financial policy, and uncertainty matter? Focusing on different income level countries. J Clean Prod 426:138846. https://doi.org/10.1016/j.jclepro.2023.138846
Contreras G, Platania F (2019) Economic and policy uncertainty in climate change mitigation: the London Smart City case scenario. Technol Forecast Soc Chang 142:384–393. https://doi.org/10.1016/j.techfore.2018.07.018
Corrado G, Corrado L (2017) Inclusive finance for inclusive growth and development. Curr Opin Environ Sustain 24:19–23. https://doi.org/10.1016/j.cosust.2017.01.013
Demirgüç-Kunt A, Singer D (2017) Financial inclusion and inclusive growth: a review of recent empirical evidence. World Bank Policy Research Working Paper, (8040). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2958542
Diniz E, Birochi R, Pozzebon M (2012) Triggers and barriers to financial inclusion: the use of ICT-based branchless banking in an Amazon county. Electron Commer Res Appl 11:484–494. https://doi.org/10.1016/j.elerap.2011.07.006
Dutta A, Bouri E, Noor MH (2018) Return and volatility linkages between CO2 emission and clean energy stock prices. Energy 164:803–810. https://doi.org/10.1016/j.energy.2018.09.055
Fang L, Bouri E, Gupta R, Roubaud D (2019) Does global economic uncertainty matter for the volatility and hedging effectiveness of Bitcoin? Int Rev Financ Anal 61:29–36. https://doi.org/10.1016/j.irfa.2018.12.010
Fareed Z, Rehman MA, Adebayo TS et al (2022) Financial inclusion and the environmental deterioration in Eurozone: the moderating role of innovation activity. Technol Soc 69:101961. https://doi.org/10.1016/j.techsoc.2022.101961
Guidolin M, La Ferrara E (2010) The economic effects of violent conflict: evidence from asset market reactions. J Peace Res 47:671–684. https://doi.org/10.1177/0022343310381853
Gyamfi BA, Bein MA, Udemba EN, Bekun FV (2022) Renewable energy, economic globalization and foreign direct investment linkage for sustainable development in the E7 economies: revisiting the pollution haven hypothesis. Int Soc Sci J 72:91–110. https://doi.org/10.1111/issj.12301
Habiba U, **nbang C (2022) The impact of financial development on CO2 emissions: new evidence from developed and emerging countries. Environ Sci Pollut Res 29:31453–31466. https://doi.org/10.1007/s11356-022-18533-3
Hou S, Zhang Y, Song L (2023) Digital finance and regional economic resilience: evidence from 283 cities in China. Heliyon 9:e21086. https://doi.org/10.1016/j.heliyon.2023.e21086
Hu J, Harmsen R, Crijns-Graus W, Worrell E (2018) Barriers to investment in utility-scale variable renewable electricity (VRE) generation projects. Renew Energy 121:730–744. https://doi.org/10.1016/j.renene.2018.01.092
Hussain S, Gul R, Ullah S et al (2023) Empirical nexus between financial inclusion and carbon emissions: evidence from heterogeneous financial economies and regions. Heliyon 9:e13164. https://doi.org/10.1016/j.heliyon.2023.e13164
Iqbal M, Chand S, Ul Haq Z (2023) Economic policy uncertainty and CO2 emissions: a comparative analysis of developed and develo** nations. Environ Sci Pollut Res 30:15034–15043. https://doi.org/10.1007/s11356-022-23115-4
Jiang C, Ma X (2019) The Impact of Financial Development on Carbon Emissions: A Global Perspective. Sustainability 11:5241. https://doi.org/10.3390/su11195241
Jiang K, You D, Merrill R, Li Z (2019a) Implementation of a multi-agent environmental regulation strategy under Chinese fiscal decentralization: an evolutionary game theoretical approach. J Clean Prod 214:902–915. https://doi.org/10.1016/j.jclepro.2018.12.252
Jiang Y, Zhou Z, Liu C (2019b) Does economic policy uncertainty matter for carbon emission? Evidence from US sector level data. Environ Sci Pollut Res 26:24380–24394. https://doi.org/10.1007/s11356-019-05627-8
** Y, Gao X, Wang M (2021) The financing efficiency of listed energy conservation and environmental protection firms: Evidence and implications for green finance in China. Energy Policy 153:112254. https://doi.org/10.1016/j.enpol.2021.112254
Junttila J, Vataja J (2018) Economic policy uncertainty effects for forecasting future real economic activity. Econ Syst 42:569–583. https://doi.org/10.1016/j.ecosys.2018.03.002
Kartal MT (2023) Production-based disaggregated analysis of energy consumption and CO2 emission nexus: evidence from the USA by novel dynamic ARDL simulation approach. Environ Sci Pollut Res 30:6864–6874. https://doi.org/10.1007/s11356-022-22714-5
Kempson E, Collard S (2012) Develo** a vision for financial inclusion. University of Bristol for Friends Provident Foundation, Bristol
Le T-H, Le H-C, Taghizadeh-Hesary F (2020) Does financial inclusion impact CO2 emissions? Evidence from Asia. Finance Res Lett 34:101451. https://doi.org/10.1016/j.frl.2020.101451
Lee C-C, Wang C-W, Pan C-M (2021) Do financial inclusion and R&D matter? Exploring the effect of uncertainty on economic performance. Appl Econ 54:307–325. https://doi.org/10.1080/00036846.2021.1950909
Liu H, Yao P, Latif S et al (2021) Impact of Green financing, FinTech, and financial inclusion on energy efficiency. Environ Sci Pollut Res 29:18955–18966. https://doi.org/10.1007/s11356-021-16949-x
Liu D, Zhang Y, Hafeez M, Ullah S (2022) Financial inclusion and its influence on economic-environmental performance: demand and supply perspectives. Environ Sci Pollut Res 29:58212–58221. https://doi.org/10.1007/s11356-022-18856-1
Mirón IJ, Linares C, Díaz J (2023) The influence of climate change on food production and food safety. Environ Res 216:114674. https://doi.org/10.1016/j.envres.2022.114674
Nawaz AD, Bhutto NA, Khan S (2023) The spillover effect of global uncertainty on BRICS stock markets. ETIKONOMI 22:45–64. https://doi.org/10.15408/etk.v22i1.24617
O’Brien KL, Leichenko RM (2000) Double exposure: assessing the impacts of climate change within the context of economic globalization. Glob Environ Chang 10:221–232. https://doi.org/10.1016/s0959-3780(00)00021-2
Omri A, Daly S, Rault C, Chaibi A (2015) Financial development, environmental quality, trade and economic growth: what causes what in MENA countries?. SSRN Electron J. https://doi.org/10.2139/ssrn.2573609
Ozili PK (2021) Does economic policy uncertainty reduce financial inclusion?. Int J Bank Finance 17. https://doi.org/10.32890/ijbf2022.17.1.3
Pata UK (2020) COVID-19 Induced economic uncertainty: a comparison between the United Kingdom and the United States. SSRN Electron J. https://doi.org/10.2139/ssrn.3637652
Pata UK, Caglar AE, Kartal MT, Kılıç Depren S (2023a) Evaluation of the role of clean energy technologies, human capital, urbanization, and income on the environmental quality in the United States. J Clean Prod 402:136802. https://doi.org/10.1016/j.jclepro.2023.136802
Pata UK, Kartal MT, Zafar MW (2023b) Environmental reverberations of geopolitical risk and economic policy uncertainty resulting from the Russia-Ukraine conflict: a wavelet based approach for sectoral CO2 emissions. Environ Res 231:116034. https://doi.org/10.1016/j.envres.2023.116034
Pirgaip B, Dinçergök B (2020) Economic policy uncertainty, energy consumption and carbon emissions in G7 countries: evidence from a panel Granger causality analysis. Environ Sci Pollut Res 27:30050–30066. https://doi.org/10.1007/s11356-020-08642-2
Qin L, Hou Y, Miao X et al (2021) Revisiting financial development and renewable energy electricity role in attaining China’s carbon neutrality target. J Environ Manag 297:113335. https://doi.org/10.1016/j.jenvman.2021.113335
Rasheed B, Law SH, Chin L, Habibullah MS (2016) The role of financial inclusion in financial development: international evidence. Abasyn Univ J Soc Sci 9(2):330–348
Renzhi N, Baek YJ (2020) Can financial inclusion be an effective mitigation measure? evidence from panel data analysis of the environmental Kuznets curve. Financ Res Lett 37:101725. https://doi.org/10.1016/j.frl.2020.101725
Romano T, Fumagalli E (2018) Greening the power generation sector: understanding the role of uncertainty. Renew Sustain Energy Rev 91:272–286. https://doi.org/10.1016/j.rser.2018.03.098
Sachs JD, Lafortune G, Fuller G, Drumm E (2023) Implementing the SDG stimulus. Sustainable Development Report 2023. Dublin: Dublin University Press, 2023. https://doi.org/10.25546/102924
Sadiq M, Hassan ST, Khan I, Rahman MM (2023) Policy uncertainty, renewable energy, corruption and CO2 emissions nexus in BRICS-1 countries: a panel CS-ARDL approach. Environ Dev Sustain. https://doi.org/10.1007/s10668-023-03546-w
Sahay R, Cihak M, N’Diaye P et al (2015) Financial inclusion: can it meet multiple macroeconomic goals? Staff Discuss Notes 15:1. https://doi.org/10.5089/9781513585154.006
Salman D, Ismael D (2023) The effect of digital financial inclusion on the green economy: the case of Egypt. J Econ Dev 25:120–133. https://doi.org/10.1108/jed-05-2022-0087
Sarma M (2016) Measuring Financial Inclusion for Asian Economies. In: Palgrave Macmillan UK eBooks. pp 3–34
Shahbaz M, Li J, Dong X, Dong K (2022) How financial inclusion affects the collaborative reduction of pollutant and carbon emissions: the case of China. Energy Econ 107:105847. https://doi.org/10.1016/j.eneco.2022.105847
Su F, Liu Y, Chen S-J, Fahad S (2023) Towards the impact of economic policy uncertainty on food security: introducing a comprehensive heterogeneous framework for assessment. J Clean Prod 386:135792. https://doi.org/10.1016/j.jclepro.2022.135792
Syed QR, Bouri E (2022) Impact of economic policy uncertainty on CO2 emissions in the US: evidence from bootstrap ARDL approach. J Public Aff 22. https://doi.org/10.1002/pa.2595
Ullah S, Ali K, Shah SA, Ehsan M (2022) Environmental concerns of financial inclusion and economic policy uncertainty in the era of globalization: evidence from low & high globalized OECD economies. Environ Sci Pollut Res 29:36773–36787. https://doi.org/10.1007/s11356-022-18758-2
United Nations (2015). Transforming our world: The 2030 Agenda for Sustainable Development. https://www.un.org/en/development/desa/population/migration/generalassembly/docs/globalcompact/A_RES_70_1_E.pdf
GPFI (2018) Better Than Cash Alliance: Achieving development and acceptance of an open and inclusive digital payments infrastructure. https://btca-production-site.s3.amazonaws.com/documents/340/english_attachments/BTCA-GPFI-OpenInclusivePayments-.pdf?1533615641
Wang Q, **ao K, Lu Z (2020) Does economic policy uncertainty affect CO2 emissions? Empirical evidence from the United States. Sustainability 12:9108. https://doi.org/10.3390/su12219108
Wang J, Dong K, Ren X (2023) Is the spatial impact of digital financial inclusion on CO2 emissions real? A spatial fluctuation spillover perspective. Geosci Front 101656. https://doi.org/10.1016/j.gsf.2023.101656
World Bank (2022) Financial inclusion. Retrieved from https://www.worldbank.org/en/topic/financialinclusion/overview#1
World Bank (2023) Open Data. https://data.worldbank.org/indicator/EN.ATM.CO2E.KT. Accessed 6 Oct 2023
Ye J, Dela E (2023) The effect of green investment and green financing on sustainable business performance of foreign chemical industries operating in Indonesia: the mediating role of corporate social responsibility. Sustainability 15:11218. https://doi.org/10.3390/su151411218
Yoshino N, Morgan P (2016) Overview of financial inclusion, regulation, and education. SSRN Electron J. https://doi.org/10.2139/ssrn.2838114
Yu J, Shi X, Guo D, Yang L (2021) Economic policy uncertainty (EPU) and firm carbon emissions: evidence using a China provincial EPU index. Energy Econ 94:105071. https://doi.org/10.1016/j.eneco.2020.105071
Author information
Authors and Affiliations
Contributions
Ameena Arshad: supervision, conceptualization, draft preparation, and literature review. Obaid Gulzar: data curation, data analysis, methodology, result interpretation, and validation. Osama Bin Shahid: methodology, draft preparation and editing. Faisal Nawaz: visualization, reviewing and editing.
Corresponding author
Ethics declarations
Ethical approval
Study did not use any data which need approval.
Consent to participate
All authors have participated in the process, and read and agreed to the published version of the manuscript.
Consent for publication
All authors have read and agreed to the published version of the manuscript.
Competing interests
The authors declare no competing interests.
Additional information
Responsible Editor: Ilhan Ozturk
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendix
Appendix
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Arshad, A., Gulzar, O., Shahid, O.B. et al. Exploring the mediating role of financial inclusion in the relationship between economic policy uncertainty and CO2 emissions: A global perspective. Environ Sci Pollut Res (2024). https://doi.org/10.1007/s11356-024-33954-y
Received:
Accepted:
Published:
DOI: https://doi.org/10.1007/s11356-024-33954-y