The Nexus between Financial Instability, Renewable Energy and Environmental Quality in the presence of Structural Breaks: Empirical Evidence from Nigeria

Abstract

The goal of the study is to look at the link between financial instability, renewable energy, and environmental quality from 1970 to 2020. To check for stationarity and cointegration among the variables, the study uses second-generation econometric approaches of Lee and Strazicich as well as Bayer and Hanck combined cointegration tests, and then uses autoregressive distributed lag (ARDL) to investigate the long and short-run dynamics of the relationship, respectively. The study's long-term findings show that financial instability, oil prices, FDI, and GDP all have a significant positive effect on CO2 emissions, which degrade environmental quality, whereas increased in renewable energy consumption decreases CO2 emissions, thereby improving the quality of the environment. The findings of this study provide policymakers with new information to help them create comprehensive financial, economic, and energy supply strategies that will reduce the damaging effects of pollution on the environment.