This study examined the combined impact of green finance, innovation, taxes and environmental policy stringency on environmental and ecological dynamics for the Organisation for Economic Co-operation and Development (OECD) countries using data from 1994 to 2020.
The study employed advanced econometric techniques, including cross-sectionally augmented Dickey-Fuller, cross-sectionally augmented Im, Pesaran and Shin, Westerlund (2007) cointegration, Methods of Moment Quantile Regression and Dumitrescu and Hurlin (2012) panel causality test.
The empirical evidence established a heterogeneous impact of green finance across quantiles, with a negative impact on biodiversity loss and a positive impact on consumption-based carbon emissions and biocapacity. Moreover, green taxes and policy stringency decrease biodiversity loss and carbon emissions. A bidirectional causality is identified between CO2 and biodiversity.
The results advocate targeted financial policies, driven by technological innovation, to improve the capability of OECD countries in mitigating emissions and preserving biodiversity.
This unique study contributes to existing literature by considering the impact of green finance, innovation and policy tools on both environmental and ecological dynamics (both biodiversity loss and biocapacity) across different quantiles.
