The long-run effect of financial development on carbon emissions in Kazakhstan

Abstract

This study examined the impact of financial development, alongside income, renewable energy consumption and exports, on CO2 emissions in Kazakhstan. To conduct this analysis, Autometrics- a machine learning modeling approach- was applied to data spanning from 1993 to 2020. The findings of estimation revealed a positive and statistically significant effect of financial development and income on CO2 emissions in Kazakhstan. Numerically, a 1% increase in financial development is associated with a 0.17% rise in CO2 emissions. The positive impact of financial development on CO2 emissions can be seen as an advanced financial system can boost funding accessibility for energy and carbon-intensive sectors, such as manufacturing and large-scale infrastructure projects, potentially resulting in increased output and economic growth, often accompanied by elevated emission levels. In addition, exports have a negative influence on CO2, whereas the impacts of renewable energy consumption are insignificant. Our findings suggest that Kazakhstan’s policymakers should prioritize channeling financial resources towards eco-friendly technologies, facilitating energy transitions, and promoting sustainable economic activities.