Financial Inclusion, Foreign Direct Investment and Carbon Footprint Nexus in OIC Countries: The Role of Institutional Quality
DOI:
https://doi.org/10.5281/zenodo.15205504Abstract
Purpose: Study aims to examine the relationship between financial inclusion, foreign direct investment, and their impact on carbon footprint, as well as to investigate the connection between these factors and the quality of institutions in shaping carbon footprint.
Design/Methodology/Approach: Panel data analysis for 30 member nations of the Organization of Islamic Cooperation (OIC) has been conducted. We employed principal component analysis to construct the composite financial inclusion index and utilized quantile regression (MMQR) for estimations.
Findings: study’s findings indicate that variables such as the financial inclusion and the role of institutional quality positively affect carbon emissions while foreign direct investment are inversely related to carbon footprint.
Implications/Originality/Value: Financial inclusion leads to increased emissions; thus, the implementation of carbon taxes or cap-and-trade systems may effectively regulate pollution. Implement a carbon tax on industries that increase emissions due to enhanced credit accessibility, and educate new members, including individuals and enterprises, on making financially sound decisions. If improved governance leads to increased emissions, it is necessary to enhance regulatory thresholds. A portion of fiscal surplus or efficiency gains resulting from institutional changes should be allocated to climate mitigation efforts, enabling this budgeting approach to finance renewable energy, enhance energy efficiency, or develop sustainable infrastructure.
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