Advancing China's sustainable future: Financial development, carbon emissions, urbanization, and renewable energy production under the Paris Agreement

Abstract

Abstract The COP26 brought global attention to pressing environmental issues such as carbon emissions, financial development, urbanization, and renewable energy production. This paper employs a nonlinear ARDL model to examine the asymmetric impact of financial development and urbanization on environmental pollution in China from 1970 to 2021. By utilizing the framework of renewable energy within Solow growth model, we assess the effects on environmental quality. The results demonstrate that the financial development and urbanization contribute positively to enhancing renewable energy production that will contribute to controlling emissions level. However, the short-term projections reveal a positive relationship between urbanization, economic growth, and renewable energy production in China. Our findings provide valuable insights for addressing environmental pollution in China and offer precise guidelines for carbon policy. Additionally, we present specific policy recommendations to support the objective of sustainable development.