The impacts of hydroelectricity generation, financial development, geopolitical risk, income, and foreign direct investment on carbon emissions in Turkey

Abstract

Climate change is considered as one of the greatest existential threats. The fight against polluting emissions such as CO₂ emissions is a necessary tool to combat this phenomenon. Turkey is one of the countries that is trying hard to achieve its goals of environmental sustainability. To this end, this study analyzes the associations between hydroelectric power generation (HPG), geopolitical risk (GPR), income, foreign direct investments (FDI), financial development, and carbon emissions from 1985 to 2021. To estimate the long-run impacts and causality links, the current analysis applies the Autoregressive Distributed Lag (ARDL) approach and the spectral causality for the period 1985–2021. The long-run findings show that GPR, HPG, and FDI reduce carbon emissions. However, income and financial development increase the CO₂ emissions. Moreover, the spectral causal outcomes provide evidence of two-way causality between hydroelectricity and pollutant emissions for the high frequency, and a one-way causality from hydroelectricity to CO₂ both for medium and low frequencies. Furthermore, there is bidirectional causality between FDI and carbon emissions for the low frequency, likewise CO₂ emissions cause FDI for low and medium frequencies. In addition, the main findings reveal the presence of bidirectional causality between pollutant emissions and financial development for high frequency, and a unidirectional causality from financial development to CO₂ emissions for medium frequency. Nevertheless, there is no causality between GPR, income, and CO₂ emissions.