Can financial inclusion be an effective mitigation measure? evidence from panel data analysis of the environmental Kuznets curve

• Published in: Finance research letters 2020-11, Vol.37, p.101725, Article 101725
• Main Authors: Renzhi, Nuobu, Baek, Yong Jun
• Format: Article
• Language: English
• Subjects: Climate change policy; Environmental Kuznets curve; Financial inclusion; Global panel data; Mitigation measure
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2020.101725

•We examine the influence of financial inclusion on CO2 emissions across 103 countries from 2004 to 2014.•We demonstrate the existence of environment Kuznets curve (EKC) and show that the relationship between financial inclusion and CO2 emissions is an inverted U-shape.•Financial inclusion can be used as a mitigation measure.•Policy makers should consider the synergy effect of financial inclusion in designingdevelopment and climate change policies. This study demonstrates the existence of financial inclusion-based environment Kuznets curve (EKC) by analyzing a panel of 103 countries during 2004–2014. The relationship between financial inclusion and CO2 emissions is found to be an inverted U-shape. This finding is robust to different measurements of the financial inclusion index constructed by principal composite analysis and modifications of the estimation model. The existence of a financial inclusion-based EKC provides an important policy insight that financial inclusion can be used as a mitigation measure. Therefore, policy makers should consider the synergy effect of financial inclusion in designing development and climate change policies.