Financial Development, Renewable Energy, and CO₂ Emissions: A Method of Moments Quantile Regression Analysis of Next-11 Countries

Abstract

The paper examines environmental degradation in Next-11 economies using the MM-Quantile Regression approach to examine the interplay among renewable energy consumption (REC), financial development (FD), economic growth (GDP) and CO2 emissions over the period 2000-2024. The findings reveal a long-run association between the study variables. The findings indicate that REC significantly reduces CO2 emissions, whereas GDP and FD enhance emissions. Evidence of distributional heterogeneity is observed. To ensure robustness, the FGLS model is used to evaluate the reliability and consistency of the main model. The MMQR findings show that the impact of REC on CO2 emissions is negative and statistically significant across all quantiles, with a stronger mitigating effect at higher-emission levels. In contrast, FD increases emissions across the distribution, but its effect diminishes at higher quantiles. Likewise, the positive and significant impact of GDP on CO2 decline as quantiles move from lower to higher. The study’s outcomes suggest that REC plays an essential role in enhancing environmental quality, while FD and GDP in Next-11 countries remain closely linked with carbon-intensive development.