Impact of financial development, trade, and energy consumption on environmental footprint in India: evidence from QARDL and wavelet coherence approach
DOI: https://doi.org/10.3846/jeelm.2026.25785Abstract
The aim of this study is to analyze the impact of financial development, trade openness, renewable energy, and nonrenewable energy consumption on CO2 emissions in India by analyzing the quarterly data from 1980 to 2020. Quantile ARDL and Wavelet Coherence methods are employed to examine the nexus. In the long and short run, nonrenewable energy consumption, financial development, and trade openness have a positive impact on CO2 emissions. When emissions are already high, it suggests that financial development may also lead to increased CO2 emissions. Moreover, Renewable energy consumption has a negative impact on CO2 emissions irrespective of the emission level that whether it is high or low in the nations, which shows that if financial enhancement increases, carbon emissions decrease. Finally, we test the EKC hypothesis, and the QARDL findings support the EKC in India. Additionally, the wavelet coherence study found a causal relationship between the CO2 emissions and independent variables, and the findings under the Wald test reject the parameter constancy for all variables. To create effective policies for environmental deterioration, the empirical findings of the current analysis can be used as guidelines for policy implications.
Keywords:
financial development, renewable and nonrenewable energy consumption, EKC, India, QARDLHow to Cite
Share
License
Copyright (c) 2026 The Author(s). Published by Vilnius Gediminas Technical University.
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Adams, S., & Nsiah, C. (2019). Reducing carbon dioxide emissions; Does renewable energy matter? Science of the Total Environment, 693, Article 133288. https://doi.org/10.1016/j.scitotenv.2019.07.094
Ahmad, A., Zhao, Y., Shahbaz, M., Bano, S., Zhang, Z., Wang, S., & Liu, Y. (2016). Carbon emissions, energy consumption and economic growth: An aggregate and disaggregate analysis of the Indian economy. Energy Policy, 96, 131–143. https://doi.org/10.1016/j.enpol.2016.05.032
Ahmed, Z., Wang, Z., Mahmood, F., Hafeez, M., & Ali, N. (2019). Does globalization increase the ecological footprint? Empirical evidence from Malaysia. Environmental Science and Pollution Research, 26(18), 18565–18582. https://doi.org/10.1007/s11356-019-05224-9
Alam, M. J., Ismat Ara Begum, I. A., Buysse, J., Rahman, S., & Van Huylenbroeck, G. (2011). Dynamic modeling of causal relationship between energy consumption, CO2 emissions and economic growth in India. Renewable and Sustainable Energy Reviews, 15(6), 3243–3251. https://doi.org/10.1016/j.rser.2011.04.029
Alam, M. S., Manigandan, P., Kisswani, K. M., & Baig, I. A. (2025). Achieving goals of the 2030 sustainable development agenda through renewable energy utilization: Comparing the environmental sustainability effects of economic growth and financial development. Sustainable Futures, 9, Article 100534. https://doi.org/10.1016/j.sftr.2025.100534
Adamowski, J., & Chan, H. F. (2011). A wavelet neural network conjunction model for groundwater level forecasting. Journal of Hydrology, 407(1–4), 28–40. https://doi.org/10.1016/j.jhydrol.2011.06.013
Aguiar-Conraria, L., Azevedo, N., & Soares, M. J. (2008). Using wavelets to decompose the time–frequency effects of monetary policy. Physica A: Statistical Mechanics and its Applications, 387(12), 2863–2878. https://doi.org/10.1016/j.physa.2008.01.063
Apergis, N., & Payne, J. E. (2011). Renewable and non-renewable electricity consumption–growth nexus: Evidence from emerging market economies. Applied Energy, 88(12), 5226–5230. https://doi.org/10.1016/j.apenergy.2011.06.041
Bloch, H., Rafiq, S., & Salim, R. (2015). Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution. Economic Modelling, 44, 104–115. https://doi.org/10.1016/j.econmod.2014.09.017
Chen, Y., Wang, Z., & Zhong, Z. (2019). CO2 emissions, economic growth, renewable and non-renewable energy production and foreign trade in China. Renewable Energy, 131, 208–216. https://doi.org/10.1016/j.renene.2018.07.047
Cho, J. S., Kim, T. H., & Shin, Y. (2015). Quantile cointegration in the autoregressive distributed-lag modeling framework. Journal of Econometrics, 188(1), 281–300. https://doi.org/10.1016/j.jeconom.2015.05.003
Dagar, V., Rao, A., Dagher, L., & Doytch, N. (2024). Climate change dynamics for global energy security and equity: Evidence from policy stringency drivers. Journal of Environmental Management, 370, Article 122484. https://doi.org/10.1016/j.jenvman.2024.122484
Danish, B. Z., Wang, B., & Wang, Z. (2017). Role of renewable energy and non-renewable energy consumption on EKC: Evidence from Pakistan. Journal of Cleaner Production, 156, 855–864. https://doi.org/10.1016/j.jclepro.2017.03.203
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366a), 427–431. https://doi.org/10.1080/01621459.1979.10482531
Dogan, E., & Seker, F. (2016). Determinants of CO2 emissions in the European Union: The role of renewable and non-renewable energy. Renewable Energy, 94, 429–439. https://doi.org/10.1016/j.renene.2016.03.078
Du, Y., & Wang, W. (2023). The role of green financing, agriculture development, geopolitical risk, and natural resource on environmental pollution in China. Resources Policy, 82, Article 103440. https://doi.org/10.1016/j.resourpol.2023.103440
Feng, S., Li, J., Nawi, H. M., Alhamdi, F. M., & Shamansurova, Z. (2024). Assessing the nexus between fintech, natural resources, government effectiveness, and environmental pollution in China: A QARDL study. Resources Policy, 88, Article 104433. https://doi.org/10.1016/j.resourpol.2023.104433
Ganda, F. (2019). The impact of innovation and technology investments on carbon emissions in selected Organisation for Economic Co-operation and Development Countries. Journal of Cleaner Production, 217, 469–483. https://doi.org/10.1016/j.jclepro.2019.01.235
Govindarajan, H. K., & Ganesh, L. S. (2021). Renewable energy for electricity use in India: Evidence from India’s smart cities mission. Renewable Energy Focus, 38, 36–43. https://doi.org/10.1016/j.ref.2021.05.005
Huang, L. (2024). Fintech inclusion in natural resource utilization, trade openness, resource productivity, recycling and minimizing waste generation: Does technology really drive economies toward green growth? Resources Policy, 90, Article 104855. https://doi.org/10.1016/j.resourpol.2024.104855
Hossain, I., Haque, A. M., & Ullah, S. A. (2023). Role of government institutions in promoting sustainable development in Bangladesh: An environmental governance perspective. Journal of Current Social and Political Issues, 1(2), 42–53. https://doi.org/10.15575/jcspi.v1i2.485
Iacobuţă, G. I., Brandi, C., Dzebo, A., & Elizalde Duron, S. D. (2022). Aligning climate and sustainable development finance through an SDG lens. The role of development assistance in implementing the Paris Agreement. Global Environmental Change, 74, Article 102509. https://doi.org/10.1016/j.gloenvcha.2022.102509
Jiang, Q., Rahman, Z. U., Zhang, X., Guo, Z., & Xie, Q. (2022). An assessment of the impact of natural resources, energy, institutional quality, and financial development on CO2 emissions: Evidence from the B&R nations. Resources Policy, 76, Article 102716. https://doi.org/10.1016/j.resourpol.2022.102716
Kai, Z., Sharaf, M., Wei, S. Y., Shraah, A. A., Le, L. T., Arvind Bedekar, D. A., & Bani Ahmad, A. Y. A. (2024). Exploring the asymmetric relationship between natural resources, fintech, remittance and environmental pollution for BRICS nations: New insights from MMQR approach. Resources Policy, 90, Article 104693. https://doi.org/10.1016/j.resourpol.2024.104693
Kang, S. H., Islam, F., & Tiwari, A. K. (2019). The dynamic relationships among CO2 emissions, renewable and non-renewable energy sources, and economic growth in India: Evidence from time-varying Bayesian VAR model. Structural Change and Economic Dynamics, 50, 90–101. https://doi.org/10.1016/j.strueco.2019.05.006
Khan, Z., Haouas, I., Trinh, H. H., Badeeb, R. A., & Zhang, C. (2023). Financial inclusion and energy poverty nexus in the era of globalization: Role of composite risk index and energy investment in emerging economies. Renewable Energy, 204, 382–399. https://doi.org/10.1016/j.renene.2022.12.122
Kim, J., & Park, K. (2016). Financial development and deployment of renewable energy technologies. Energy Economics, 59, 238–250. https://doi.org/10.1016/j.eneco.2016.08.012
Magazzino, C., Mutascu, M., Sarkodie, S. A., Adedoyin, F. F., & Owusu, P. A. (2021). Heterogeneous effects of temperature and emissions on economic productivity across climate regimes. Science of the Total Environment, 775, Article 145893. https://doi.org/10.1016/j.scitotenv.2021.145893
Mngumi, F., Shaorong, S., Shair, F., & Waqas, M. (2022). Does green finance mitigate the effects of climate variability: Role of renewable energy investment and infrastructure. Environmental Science and Pollution Research, 29(39), 59287–59299. https://doi.org/10.1007/s11356-022-19839-y (Retraction published 2024, Environmental Science and Pollution Research, 31, 46118)
Murshed, M., & Alam, M. S. (2021). Estimating the macroeconomic determinants of total, renewable, and non-renewable energy demands in Bangladesh: The role of technological innovations. Environmental Science and Pollution Research, 28, 30176–30196. https://doi.org/10.1007/s11356-021-12516-6
Murshed, M., Khan, U., Khan, A. M., & Ozturk, I. (2023). Can energy productivity gains harness the carbon dioxide‐inhibiting agenda of the Next 11 countries? Implications for achieving sustainable development. Sustainable Development, 31(1), 307–320. https://doi.org/10.1002/sd.2393
Mohanty, A., & Wadhawan, S. (2021). Mapping India’s climate vulnerability: A district level assessment report. Council on Energy, Environment and Water (CEEW), New Delhi.
Neog, Y., & Yadava, A. K. (2020). Nexus among CO2 emissions, remittances, and financial development: A NARDL approach for India. Environmental Science and Pollution Research, 27(35), 44470–44481. https://doi.org/10.1007/s11356-020-10198-0
Nibedita, B., & Irfan, M. (2022). Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market. Renewable Energy, 194, 538–551. https://doi.org/10.1016/j.renene.2022.05.116
Paramati, S. R., Apergis, N., & Ummalla, M. (2017). Financing clean energy projects through domestic and foreign capital: The role of political cooperation among the EU, the G20 and OECD countries. Energy Economics, 61, 62–71. https://doi.org/10.1016/j.eneco.2016.11.001
Paraschiv, F., Fleten, S. E., & Schürle, M. (2015). A spot-forward model for electricity prices with regime shifts. Energy Economics, 47, 142–153. https://doi.org/10.1016/j.eneco.2014.11.003
Pata, U. K., Kartal, M. T., Adebayo, T. S., & Ullah, S. (2023). Enhancing environmental quality in the United States by linking biomass energy consumption and load capacity factor. Geoscience Frontiers, 14(3), Article 101531. https://doi.org/10.1016/j.gsf.2022.101531
Przychodzen, W., & Przychodzen, J. (2020). Determinants of renewable energy production in transition economies: A panel data approach. Energy, 191, Article 116583. https://doi.org/10.1016/j.energy.2019.116583
Qamruzzaman, M., & Karim, S. (2023). Does public-private investment augment renewable energy consumption in BIMSTEC nations? Evidence from symmetric and asymmetric assessment. Energy Strategy Reviews, 49, Article 101169. https://doi.org/10.1016/j.esr.2023.101169
Qin, M., Su, C. W., Umar, M., Lobonţ, O. R., & Manta, A. G. (2023). Are climate and geopolitics the challenges to sustainable development? Novel evidence from the global supply chain. Economic Analysis and Policy, 77, 748–763. https://doi.org/10.1016/j.eap.2023.01.002
Saqib, N., Ozturk, I., & Usman, M. (2023). Investigating the Implications of technological innovations, financial inclusion, and renewable energy in diminishing ecological footprints levels in emerging economies. Geoscience Frontiers, 14(6), Article 101667. https://doi.org/10.1016/j.gsf.2023.101667
Sebri, M., & Ben-Salha, O. (2014). On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: Fresh evidence from BRICS countries. Renewable and Sustainable Energy Reviews, 39, 14–23. https://doi.org/10.1016/j.rser.2014.07.033
Salifu, M., Peprah, J. A., Sebu, J., & Cantah, W. G. (2024). Openness policies and financial development in Ghana: An ARDL approach. Heliyon, 10(3), Article e25074. https://doi.org/10.1016/j.heliyon.2024.e25074
Shabbir Alam, M., Duraisamy, P., Bakkar Siddik, A., Murshed, M., Mahmood, H., Palanisamy, M., & Kirikkaleli, D. (2023). The impacts of globalization, renewable energy, and agriculture on CO2 emissions in India: Contextual evidence using a novel composite carbon emission-related atmospheric quality index. Gondwana Research, 119, 384–401. https://doi.org/10.1016/j.gr.2023.04.005
Shahbaz, M., Siddiqui, A., Sinha, A., & Bigerna, S. (2024). Does financial development enhance access to electricity? A rural-urban perspective in India. Energy, 291, Article 130464. https://doi.org/10.1016/j.energy.2024.130464
Shahbaz, M., Topcu, B. A., Sarıgül, S. S., & Vo, X. V. (2021). The effect of financial development on renewable energy demand: The case of developing countries. Renewable Energy, 178, 1370–1380. https://doi.org/10.1016/j.renene.2021.06.121
Shahbaz, M., Zakaria, M., Shahzad, S. J. H., & Mahalik, M. K. (2018). The energy consumption and economic growth nexus in top ten energy-consuming countries: Fresh evidence from using the quantile-on-quantile approach. Energy Economics, 71, 282–301. https://doi.org/10.1016/j.eneco.2018.02.023
Sharif, A., Baris-Tuzemen, O., Uzuner, G., Ozturk, I., & Sinha, A. (2020). Revisiting the role of renewable and non-renewable energy consumption on Turkey’s ecological footprint: Evidence from quantile ARDL approach. Sustainable Cities and Society, 57, Article 102138. https://doi.org/10.1016/j.scs.2020.102138
Shastri, S., Mohapatra, G., & Giri, A. K. (2020). Economic growth, renewable and nonrenewable energy consumption nexus in India: Evidences from nonlinear ARDL approach and asymmetric causality analysis. International Journal of Energy Sector Management, 14(4), 777–792. https://doi.org/10.1108/IJESM-06-2019-0016
Van Soest, H. L., den Elzen, M. G., & van Vuuren, D. P. (2021). Net-zero emission targets for major emitting countries consistent with the Paris Agreement. Nature Communications, 12(1), Article 2140. https://doi.org/10.1038/s41467-021-22294-x
Zivot, E., & Andrews, D. W. K. (1992). Further evidence on the great crash, the oil price shock, and the unit root hypothesis. Journal of Business and Economic Statistics, 10(3), 251–270. https://doi.org/10.1080/07350015.1992.10509904
Zhong, Y., Chen, X., Yao, X., Wang, Z., & Chang, H. L. (2024). Natural resources and the trilemma of financial development, institutions, and markets: Sustainable development pathway via natural resources for China. Resources Policy, 90, Article 104759. https://doi.org/10.1016/j.resourpol.2024.104759
Zouine, M., El Adnani, M. J., & Salhi, S. E. (2024). Does higher education matter in mitigating chronic disease mortality? Evidence from MENA countries with consideration of globalization, economic growth, and environmental pollution. Research in Globalization, 9, Article 100236. https://doi.org/10.1016/j.resglo.2024.100236
View article in other formats
CrossMark check
Published
Issue
Section
Copyright
Copyright (c) 2026 The Author(s). Published by Vilnius Gediminas Technical University.
License
This work is licensed under a Creative Commons Attribution 4.0 International License.