Environmental Sustainability in Emerging Countries: The Role of Green Energy, Green Finance and Digitalization

Fakhra Aslam; Muhammad Ahsan Bhutta; Muhammad Muzammil Asghar; Dr. Muhamad Faseeh Ullah Khan; Javeria Rashid

doi:10.63544/ijss.v4i3.159

Authors

Fakhra Aslam Higher Education Department, Punjab
Muhammad Ahsan Bhutta Department of Economics, Islamia University of Bahawalpur, Pakistan
Muhammad Muzammil Asghar School of Economics, Bahauddin Zakariya University, Multan, Pakistan
Dr. Muhamad Faseeh Ullah Khan Nazeer Hussain University, Karachi
Javeria Rashid Lahore College for Women University, Lahore

DOI:

https://doi.org/10.63544/ijss.v4i3.159

Keywords:

CO₂ Emissions, Digitalization, Economic Growth, Green Finance, Renewable Energy, Trade Openness

Abstract

This study examines the interplay between green energy, green finance, and digitalization in fostering environmental sustainability across a panel of emerging economies from 2000 to 2024. Utilizing advanced panel econometric techniques, including Cross-Sectional Augmented IPS (CIPS) and CADF unit root tests, Pedroni and Westerlund cointegration methods, and a CS-ARDL model, the analysis reveals that renewable energy adoption, green financial mechanisms, and digital transformation significantly mitigate CO₂ emissions in both the short and long term. Conversely, GDP per capita demonstrates a positive correlation with emissions, underscoring the ecological trade-offs of economic growth. Trade openness exhibits a modest negative link with CO₂ emissions, implying that its environmental effects may vary based on trade structure and policy frameworks. Robustness checks via FMOLS and DOLS estimators validate the reliability of these results, while the Dumitrescu–Hurlin Granger causality test confirms unidirectional causality from renewable energy, green finance, and digitalization to emissions reduction.

The findings emphasize the critical need for holistic policy strategies that simultaneously scale up renewable energy infrastructure, strengthen green financing instruments, and promote digital innovation to drive sustainable decarbonization. Additionally, sector-specific regulations, public-private partnerships, and international cooperation are vital to maximizing synergies among these drivers. By offering empirical evidence across multiple emerging economies, this study enriches the discourse on low-carbon transitions and provides actionable insights for policymakers seeking to balance economic development with ecological preservation. The research also highlights the importance of technology transfer and capacity-building in ensuring equitable green growth, particularly for developing nations. Ultimately, this work contributes to a deeper understanding of the pathways toward achieving global climate targets while fostering inclusive and sustainable development.

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