Gravitating towards emission reduction targets in the G7 and E7 economies: the financial development and sustainable energy perspectives

Figures & data

Table 1. Description of Variables.

Indicators	Their Short forms	Measurement scales	Data Source
CO2 emissions Per Capita	CO2	Calculated in their metric tons	British Petroleum, 2021
Financial development	FD	domestic credit to private sectors, % of GDP	WDI, 2021
Economic growth	Y	Proxied by the gross domestic product per capita (2015 Constant USD)	WDI, 2021
Square of Economic growth	Y^2	Proxied by the square of gross domestic product per capita (2015 Constant USD)	WDI, 2021
Renewable Energy	REC	Renewable energy consumption (% of total final energy consumption)	British Petroleum, 2021
Interaction term	Y*REC	Economic growth* Renewable Energy

Note: all factors are log transformed to control for homoscedasticity of the variables.

Source: Authors compilation.

Table 2. The CD & SH Analyses.

	Pesaran CD	Pesaran scaled LM	Breusch-Pagan LM	Pesaran CD	Pesaran scaled LM	Breusch-Pagan LM	Pesaran CD	Pesaran scaled LM	Breusch-Pagan LM
Variables	E7 ECONOMIES			G7 ECONOMIES			COMBINED ECONOMIES
LCO2	18.864*	51.247*	360.119*	11.779*	36.231*	262.805*	14.111*	81.186*	1200.271*
LFD	5.799*	13.239*	113.804*	13.889*	54.080*	378.480*	4.516*	60.255*	917.885*
LY	19.534*	54.955*	384.154*	21.558*	69.593*	479.016*	38.337*	111.745*	1612.532*
LREC	11.935*	31.892*	234.685*	4.5405*	41.449*	296.624*	17.106*	65.644*	990.598*
LY*LREC	4.796*	20.772*	162.620*	4.094*	35.189*	256.054*	7.690*	51.930*	805.576*
	COEFFICIENT			COEFFICIENT			COEFFICIENT
Slope Homogeneity (SH)
SH ($\tilde{\mathbf{\Delta }}$ test)	5.055*			3.456*			6.012*
SH ($\tilde{\mathbf{\Delta }}$ adj test)	6.009*			4.435*			7.103*

Note: *<0.01.

Table 3. The panel unit root Analysis.

Variables	I(1)		I(1)		I(1)
	E7		G7		Panel of E7 and G7
	C	C&T	C	C&T	C	C&T
LCO2	−3.183*	−3.682*	−5.743*	−5.763*	−4.283*	−4.170*
LFD	−3.847*	−3.109*	−2.628*	−3.883*	−3.864*	−3.850*
LY	−3.806*	−3.171*	−3.844*	−3.949*	−2.582*	−3.308*
LREC	−2.976*	−3.874*	−5.024*	−5.042*	−4.224*	−4.238*
LY*LREC	−2.663*	−4.283*	−4.732*	−4.800*	−3.784*	−4.382*

Note: *<0.01 level of significance. Meanwhile, the (C) is for constant model &; (C&T) is for constant and trend models.

Table 4. The cointegration Analysis.

Tests	E7		G7		Panel of E7 and G7
Statistics	Value	p-value	Value	p-value	Value	p-value
Gτ	−3.776*	(0.009)	−2.041*	(0.006)	−4.416*	(0.008)
Gα	−4.268*	(0.002)	−7.215*	(0.009)	−3.102*	(0.000)
Pτ	−2.878*	(0.005)	−4.933*	(0.002)	−5.237*	(0.000)
Pα	−2.389*	(0.001)	−6.188*	(0.009)	−4.378*	(0.006)

Note: *<0.01.

Table 5. QR and AMG Empirical Analysis.

Variables	AMG	Qtil-0.25	Qtil-0.50	Qtil-0.75
E7
LFD	0.589***	0.886*	0.668*	0.591*
p-value	(0.089)	(0.00)	(0.005)	(0.005)
LY	0.903*	0.313**	0.208***	0.734**
P-value	(0.00)	(0.011)	(0.071)	(0.010)
LY^2	−0.061*	−0.501**	−0.029**	−0.452***
p-value	(0.00)	(0.047)	(0.020)	(0.085)
LREC	−0.252*	−0.512*	−0.156***	−0.716**
p-value	(0.000)	(0.00)	(0.080)	(0.010)
LY*LREC	−0.286*	−0.642*	−0.197***	−0.470**
p-value	(0.000)	(0.000)	(0.084)	(0.033)
Wald test	912.20*	-	-	-
P -value	(0.000)	-	-	-
Pseudo R^2/R^2	-	0.246	0.357	0.363
G7
LFD	−0.329**	−0.257*	−0.212**	−0.777*
p-value	(0.046)	(0.001)	(0.026)	(0.000)
LY	0.980**	0.512**	0.642***	0.588*
p-value	(0.032)	(0.024)	(0.053)	(0.002)
LY2	−0.298***	−0.389*	−0.471*	−0.279*
p-value	(0.071)	(0.000)	(0.000)	(0.009)
LREC	−1.634*	−1.251***	−1.192**	−1.417**
p-value	(0.008)	(0.061)	(0.025)	(0.039)
LY*LREC	−0.691**	−1.503**	−1.792**	−1.541**
p-value	(0.024)	(0.044)	(0.027)	(0.016)
Wald test	45.456*	-	-	-
p-value	(0.002)	-	-	-
Pseudo R^2/R^2	-	0.379	0.305	0.324
E7 and G7 Panel
LFD	−0.335*	−0.078**	−0.143**	−0.378*
p-value	(0.007)	(0.013)	(0.036)	(0.003)
LY	0.430*	0.254*	0.782*	0.648*
P -value	(0.00)	(0.000)	(0.00)	(0.000)
LY2	−0.155*	−0.516**	−0.464*	−0.751*
p-value	(0.000)	(0.017)	(0.000)	(0.000)
LREC	−1.571*	−0.319*	−0.955*	−0.466*
P-value	(0.001)	(0.00)	(0.000)	(0.00)
LY*LREC	−0.181*	−2.366*	−2.819	−3.213
p-value	(0.000)	(0.000)	(0.000)	(0.000)
Wald test	34.232**	-	-	-
p-value	(0.012)	-	-	-
Pseudo R^2/R^2	-	0.635	0.788	0.761

Note:*<0.01, **<0.05, ***<0.10.

Table A1. Descriptive statistics and correlation matrix.

	LCO2	LFD	LY	LREC	LY*LREC
E7 ECONOMIES
Mean	13.578	3.775	8.493	2.942	25.288
Median	13.105	3.873	8.952	3.065	27.434
Maximum	16.153	4.5662	9.551	3.997	35.436
Minimum	12.055	2.749	6.514	1.171	9.213
G7 ECONOMIES
Mean	2.297	4.770	21.179	4.355	46.127
Median	2.245	4.727	21.182	4.421	46.722
Maximum	3.004	5.399	21.814	4.550	48.875
Minimum	1.520	4.068	20.479	3.833	40.761
COMBINED ECONOMIES
Mean	7.163	4.341	9.685	3.746	37.138
Median	2.846	4.325	10.421	3.997	41.974
Maximum	16.153	5.399	10.907	4.550	48.875
Minimum	1.520	2.749	6.514	1.171	9.213
CORRELATON
E7 ECONOMIES						VIF
LCO2	1.000					-
LFD	−0.790	1.000				0.510
LY	−0.885	0.677	1.000			0.264
LREC	−0.712	0.525	0.779	1.000		0.391
LY*LREC	−0.841	0.645	0.902	0.969	1.000	0.217
G7 ECONOMIES
LCO2	1.000					-
LFD	0.542	1.000				0.345
LY	0.363	0.651	1.000			0.243
LREC	0.4302	0.2671	−0.0254	1.000		0.421
LY*LREC	0.527	0.462	0.292	0.948	1.000	0.256
COMBINE ECONOMIES
LCO2	1.000					-
LFD	−0.137	1.000				0.267
LY	−0.334	−0.305	1.000			0.352
LREC	0.425	−0.424	0.387	1.000		0.489
LY*LREC	0.264	−0.451	0.611	0.964	1.000	0.478

British Petroleum. (2021). BP Statistical review of world energy 2020. https://www. bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energyeconomics/statistical review/bp-stats-review-2020-full-report.pdf.

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