Relationship between financial inclusion and carbon emissions: International evidence

Muhammad Akbar, Raazia Gul, Syed Jawad Hussain Shahzad, Nader Naifar, Shahzad Hussain

Research output: Contribution to journalArticlepeer-review


The nexus between financial inclusion and carbon emissions is becoming an increasingly important topic, given the augmented awareness of the negative impacts of climate change and carbon emissions on the environment and human health. In this study, we examine the impact of financial inclusion on carbon emissions using the STIRPAT framework for 102 countries from 2004 to 2020. We measure financial inclusion as a composite index, using principal component analysis (PCA) from five financial inclusion proxies. Our robust panel regression estimations suggest an N-Shaped relationship between financial inclusion and carbon emissions. The N-shaped Environmental Kuznets Curve (EKC) implies that the impact of financial inclusion on carbon emission is nonlinear and changes from an inverted U-shaped to a U-shaped. This finding is strong in developing countries and weak in advanced countries. It is also robust across our two normalized measures of financial inclusion as well as across different estimation techniques. These findings suggest adapting a universal environmental strategy that enhances financial inclusion through strong and accessible financial systems, particularly for low-income countries. Our results further suggest that government authorities and policymakers need to develop well-directed and inclusive financial policies that consider the varying levels of governance, regulations, and income across countries.
Original languageEnglish
Article numbere16472
Pages (from-to)1-15
Number of pages15
Issue number6
Early online date22 May 2023
Publication statusPublished - Jun 2023

Bibliographical note

Funding: The authors extend their appreciation to the Deanship of Scientific Research at Imam Mohammad Ibn Saud Islamic University for
funding and supporting this work through Research Partnership Program no. RP-21-10-02.
Copyright © 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (


  • GHG emissions
  • inclusive financial system
  • EKC hypothesis
  • panel data


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