The Relationship Between Financial Development and CO₂ Emissions in BRICS Countries

Articles in Press

Document Type : Original Article

Authors

Fateme Namazi ¹

Seyed Kamal sadeghi ²

¹ PhD student in economic sciences, majoring in economic development

² Professor, Department of Economics, University of Tabriz, Tabriz, Iran

https://doi.org/10.22067/mfe.2026.95751.1620

Abstract

Abstract:
In today's world, climate change and the environmental consequences of greenhouse gas emissions represent one of the most critical global challenges. Financial development, as a key factor, can play a significant role in reducing these emissions and serve as a powerful tool to combat climate change and mitigate adverse environmental effects. The substantial increase in energy consumption has led to environmental degradation in BRICS countries—economies that have experienced rapid industrial growth due to their strong economic structures. This study aims to investigate the relationship between financial development and CO₂ emissions in BRICS countries using panel regression over the period 1990–2023. The findings indicate that financial development (FE), foreign direct investment (FDI), economic growth, and industrialization have a positive and significant relationship with carbon dioxide emissions. This suggests that the current trajectory of financial development and investment attraction in these countries, driven by a focus on polluting industries, has exacerbated emissions. In contrast, energy consumption exhibits a negative and significant impact on emissions. The effects of inflation and innovation on emissions were not statistically significant. Accordingly, it is recommended that BRICS countries reform their financial policies and revise their investment attraction models toward green development and clean technologies. Such measures can help mitigate further environmental degradation while maintaining economic growth.

Keywords

Financial Development

Carbon dioxide emissions

BRICS Countries

Panel Data Analysis

Subjects

• Energy Economy

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