Financial Efficiency and Its Impact on Renewable Energy Demand and CO₂ Emissions: Do Eco-Innovations Matter for Highly Polluted Asian Economies?

The analysis aims to examine the impact of eco-innovation and financial efficiency on CO2 emissions and renewable energy consumption in highly polluted Asian economies, including China, India, Russia, and Japan. For empirical analysis, we have applied the ARDL pooled mean group (ARDL-PMG) model. The long-run estimated coefficient of environmental innovations is positively significant in both renewable energy models and negatively significant in the CO2 emissions model. These results imply that environmental innovations help facilitate renewable energy consumption and reduce CO2 emissions. On the other side, the estimates of financial development are insignificant in both renewable energy and CO2 emissions models. However, the estimates of financial institution efficiency and financial markets are positively significant in both renewable energy and CO2 emissions models, implying that financial institutions and market efficiency increase renewable energy consumption and decrease CO2 emissions