THE IMPACT FINANCIAL DEVELOPMENT ON CARBON EMISSIONS: A SYSTIMATC REVIEW OF THE LITERATURE

Abstract

This research examines the complex relationship between financial development and carbon emissions. This strategy emphasises distinguishing industrialised and developing nations due to their different economic circumstances. The research assumes that carbon emissions rise as economies and financial systems grow. It is vital to understand the root reasons for this scenario. The research shows that financial development has two effects on carbon emissions. Financial institutions allow businesses that may not value environmental sustainability to grow, which can increase carbon emissions. However, financial development can reduce carbon emissions by supporting green technology and practices. The research uses a thorough literature review to synthesise and interpret the vast empirical research data. Study methods, components, and timeframes from previous studies are carefully reviewed. Although findings vary, the analysis shows that countries with well-developed financial systems perform better environmentally. Their ability to promote green technologies and pollution reduction programmes gives them this advantage. The report also finds a research gap, highlighting the need for a more comprehensive study of the complicated relationship between financial development and carbon emissions. According to this statement, green financial instruments encourage environmentally sustainable projects and investments, reduce emissions, and alleviate state development inequities. The study illuminates policy effects for policymakers. This shows that an advanced financial system could enable environmentally friendly economic growth. This shows that governments and financial organisations may boost economic growth and environmental protection by enacting intelligent policies and offering incentives. The report thoroughly examines the complex relationship between financial development and carbon emissions, offering insights into balancing economic expansion with environmental protection.