Navigating the asymmetric influence of financial inclusion on environmental sustainability: Dynamic role of energy consumption and human capital

Abstract

Due to the adoption of more financial inclusion (FI), energy utilization with sustainability became a challenge for world economies. Our research examines whether FI symmetrically and asymmetrically affects environmental sustainability in Pakistan. Six proxies are indexed for the FI data through principal component analysis (PCA). In the present research explanatory variables are, energy usage, industrialization, urbanization, and human capital during from 1975 to 2018. Our study engaged the Stochastic Impact by Regression on Population, Affluence, and Technology Approach (STIRPAT). Additionally, the econometric strategy is adopted for the empirical analysis to acquire the symmetric and asymmetric outcomes. The empirical result validates the asymmetric association of FI and carbon dioxide (CO2) emanations in short and long lags. Besides, fossil energy utilization, industrialization, and urbanization smoothen the path of environmental pollution. However, human capital significantly aids in reducing carbon pollution in the short and long terms. The policy makers can practically implement the research to utilize FI effectively to improve environmental sustainability and develop policies that discourage fossil energy utilization. Moreover, we pointed out the alarming situation of dealing with harmful emissions from urbanization and industrialization.