Consumption-based CO2 emissions in Denmark: The role of financial stability and energy productivity

Modupe Oluyemisi Oyebanji; Dervis Kirikkaleli; Abraham Ayobamiji Awosusi

doi:10.1002/ieam.4757

Consumption-based CO₂ emissions in Denmark: The role of financial stability and energy productivity

Integr Environ Assess Manag. 2023 Nov;19(6):1485-1494. doi: 10.1002/ieam.4757. Epub 2023 May 16.

Authors

Modupe Oluyemisi Oyebanji¹, Dervis Kirikkaleli², Abraham Ayobamiji Awosusi³

Affiliations

¹ Department of Business Administration, Faculty of Economic and Administrative Sciences, European University of Lefke, Lefke, Northern Cyprus, Turkey.
² Department of Banking and Finance, Faculty of Economic and Administrative Sciences, European University of Lefke, Lefke, Northern Cyprus, Turkey.
³ Faculty of Economics, Administrative and Social Science, Department of Economics, Bahçeşehir Cyprus University, Nicosia, Turkey.

PMID: 36880367
DOI: 10.1002/ieam.4757

Abstract

Climate change can be mitigated and policies can be catalyzed with the aid of financial institutions. By maintaining and strengthening financial stability, the financial sector's resilience could help mitigate climate-related risks and uncertainties. Hence, an empirical investigation on the effect of financial stability on consumption-based CO₂ emissions (CCO₂ E) in Denmark is long overdue. This study investigates the financial risk-emissions relationship in the presence of energy productivity, energy consumption, and economic growth in Denmark. Furthermore, by adopting an asymmetric approach to analyze the time series data for the period between 1995 and 2018, this study helps bridge this major gap in the literature. By adopting the nonlinear autoregressive distributed lag approach (NARDL), we discovered that the positive variation in financial stability causes a reduction in CCO₂ E, but the neutral connection was reported between the negative shock in financial stability and CCO₂ E. The positive shock in economic growth and energy consumption intensifies CCO₂ E; however, a neutral interaction exists between the negative shock in economic growth and CCO₂ E. The negative shock in energy consumption has a positive effect on CCO₂ E, indicating a mitigating implication on environmental degradation. In addition, a positive shock in energy productivity enhances environmental quality, while a negative shock in energy productivity increases environmental degradation. In light of the results, we suggest some robust policies for Denmark and other smaller but wealthy nations. Moreover, in order to develop sustainable finance markets, policymakers in Denmark need to mobilize both public and private finance while maintaining a balance with other economic needs of the nation. The country must also identify and understand potential avenues for scaling up private financing for mitigating climate risk. Integr Environ Assess Manag 2023;19:1485-1494. © 2023 SETAC.

Keywords: Consumption-based CO2 emissions; Denmark; Energy productivity; Financial stability; NARDL.

MeSH terms

Carbon Dioxide* / analysis
Denmark
Economic Development*
Renewable Energy

Substances

Carbon Dioxide