Analyzing the Impact of RenewableEnergy,Financial Development, FDI, andEconomicGrowth on CO2 Emissions inEmergingEconomies

Abstract

Purpose: This study explores the impact of economic growth (GDP), Renewable Energy Consumption (REC), Financial Development (FD), and FDI on Environmental Quality in 70 developing economies, with the goal of evaluating the balancebetweeneconomic progress and environmental sustainability. Methodology: The study uses panel cointegration analysis on data from 2022 to 2023 sourced from the World Bank's WDI database to identify long-term relationships between the variables and provide insights into their inter dependencies. Findings: The findings show a strong positive correlation (0.920) between Economic Growth (GDP) and CO2 emissions,indicating significant environmental costs of growth. Financial Developmental so correlates positively with CO2 emissions, suggesting its role in environmentaldegradation. In contrast, Renewable Energy Consumption and FDI have weak to negative correlations with CO2 emissions, reflecting their limited current impact on emissions reduction. However, the results highlight the potential of renewable energy to mitigate the environmental effects of financial growth, emphasizing its importance for sustainable development. Originality: This research provides a unique empirical analysis of the interaction between economic and environmental variablesin emerging economies using robust methodologies and a large dataset. Implications:The study highlights the need for sustainable energy policies, increased investments in renewables, and eco-friendly financial strategies to harmonize economic growth with environmental preservation. Limitations: Key constraints includelimiteddataavailability for 70 economies, contextual variability among countries, andtheinabilityto capture short-term dynamics or policy impacts. Future Directions: Future research should include more countries, use dynamic models for short-term policy analysis,explore sector-specific effects of FDI and financial development, and assess renewable energy policies to develop global best practices.

Keywords: FDI, Economic Growth, Financial Development, Renewable Energy Consumption, Environmental Quality, CO2 Emissions, Emerging Economies, PanelCointegration Analysis