Impact of Financial Development and Industrialization on Environmental Degradation: Evidence from South Asian Countries

Abstract

CO2 emissions may affect economic growth and development. It has been observed that emissions are the result of increased energy use, industrialization, and urbanization in Asian countries. Emissions are rising faster than natural rates. Considering the effects of financial inclusion on CO2 emissions, we have examined how industrialization, urbanization, and income inequality affect the emissions in South Asian economies by using data from 2005 to 2020. Fixed effect results show that financial development is the key driver of CO2 emissions. Findings also point out that industrialization and urban population also enhance the CO2 emissions. Finally, income inequality also seems to be affecting the emissions in developing countries. The study suggests that there should be more provision of a clean environment. Energy policies should focus on the supply of better-quality energy by using other sources. Rapid industrialization must contribute to environmental degradation. And finally, there is a dire need to control the urban population for low environmental degradation.