The effects of financial development, trade and energy consumption on environmental degradation: Evidence from APEC countries

ABSTRACT

This paper investigates the relationship among CO2 emissions, energy consumption, economic growth, financial development, and trade in APEC countries based on quarterly data from 1985:Q4 to 2020:Q4 utilizing the Method of Moments Quantile Regression (MMQR). The results demonstrate that both GDP and energy consumption have a positive and statistically significant effect on CO2 emissions. However, this effect diminishes as the conditional quantile of CO2 increases. Additionally, the study reveals that financial development has a positive and significant impact on CO2 emissions, with its influence increasing at higher quantiles. The MMQR estimates suggest that increasing trade openness has led to improvements in environmental quality. Based on these findings, it is recommended that APEC countries implement environmentally friendly policies to achieve sustainable economic development in the region. Hence, it is essential for financial development, energy consumption, and trade openness policies to align with strategies aimed at reducing environmental degradation.

KEYWORDS:

• CO₂ emissions
• energy consumption
• financial development
• trade openness
• MMQR model
• APEC countries

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ For more information on the model’s estimation steps, refer to Machado and Silva (2019).