Publication:
Financial Deepening and Carbon Emissions Intensity: Evidence from a Global Sample of Countries

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dc.contributor.authorFisera, Boris
dc.contributor.authorMelecky, Martin
dc.contributor.authorSinger, Dorothe
dc.date.accessioned2024-10-16T18:00:30Z
dc.date.available2024-10-16T18:00:30Z
dc.date.issued2024-10-16
dc.description.abstractFinancial deepening contributes to economic development, but its effect on the carbon intensity of production is an open empirical question. If banks finance investments in new, greener technologies, they can contribute to lowering carbon dioxide emissions per unit of output. But if they finance investments in more traditional, carbon-intensive technologies, they can contribute to increasing carbon dioxide emissions per unit of output. This paper studies the impact of financial deepening—an increased provision of bank credit as a share of gross domestic product—on carbon dioxide emissions per dollar of gross domestic product in a global sample of 125 economies from 1990 to 2019. Using a local projections approach, the paper finds that, on average, financial deepening leads to a relative increase in carbon dioxide emissions per dollar of gross domestic product, indicating that financial institutions finance relatively more carbon-intensive investments and consumption. However, a better institutional environment mitigates this adverse effect of financial deepening: conditional local projections reveal that in countries with more environmental regulations, a stronger rule of law, and a financial system that is relatively more market- than bank-based, financial deepening does not lead to higher carbon dioxide emissions per dollar of gross domestic product. Specifically, the results show that countries with an initially lower carbon intensity of production can mitigate the average adverse effect of financial deepening on carbon dioxide emissions per dollar of gross domestic product by improving their general institutional environment proxied by adherence to the rule of law, and, to some extent, by developing their financial markets. By contrast, countries with an initially higher carbon intensity of production are better off focusing on environmental regulations to mitigate the unconditional adverse effect of financial deepening on carbon dioxide emissions per dollar of gross domestic product.en
dc.identifierhttp://documents.worldbank.org/curated/en/099419410072415057/IDU165d057bb189e414373188f117128629f2a1b
dc.identifier.doi10.1596/1813-9450-10948
dc.identifier.urihttps://hdl.handle.net/10986/42254
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 10948
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectCO2 EMISSIONS
dc.subjectBANK CREDIT
dc.subjectCARBON INTENSITY OF CREDIT
dc.subjectFINANCIAL DEEPENING
dc.subjectFINANCIAL INSTITUTIONS
dc.subjectDECENT WORK AND ECONOMIC GROWTH
dc.subjectSDG 8
dc.subjectCLIMATE ACTION
dc.subjectSDG 13
dc.titleFinancial Deepening and Carbon Emissions Intensityen
dc.title.subtitleEvidence from a Global Sample of Countriesen
dc.typeWorking Paper
dspace.entity.typePublication
okr.crossref.titleFinancial Deepening and Carbon Emissions Intensity: Evidence from a Global Sample of Countries
okr.date.disclosure2024-10-16
okr.date.lastmodified2024-10-07T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099419410072415057/IDU165d057bb189e414373188f117128629f2a1b
okr.guid099419410072415057
okr.identifier.docmidIDU-65d057bb-89e4-4373-88f1-7128629f2a1b
okr.identifier.doi10.1596/1813-9450-10948
okr.identifier.doihttps://doi.org/10.1596/1813-9450-10948
okr.identifier.externaldocumentum34400852
okr.identifier.internaldocumentum34400852
okr.identifier.reportWPS10948
okr.import.id5477
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099419410072415057/pdf/IDU165d057bb189e414373188f117128629f2a1b.pdfen
okr.region.geographicalWorld
okr.topicEnvironment::Carbon Policy and Trading
okr.topicEnvironment::Climate Change Impacts
okr.topicFinance and Financial Sector Development::Financial Structures
okr.topicEnvironment::Environmental Economics & Policies
okr.unitProsperity-FCI-TIC-Mkts
okr.unitComp&Tec (ETIMT)
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relation.isAuthorOfPublication.latestForDiscoveryc2369c70-649c-4c08-a1c8-b1dcb7d123de
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
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