ORIGINAL RESEARCH article
Front. Environ. Sci.
Sec. Environmental Economics and Management
Volume 13 - 2025 | doi: 10.3389/fenvs.2025.1594858
This article is part of the Research TopicClimate Risk and Green and Low-Carbon Transformation: Economic Impact and Policy ResponseView all 30 articles
Toward a sustainable development: Nexus between financial development, renewable energy and carbon emission in China
Provisionally accepted
- 1Suzhou University, Suzhou, Anhui, China
- 2Gangneung–Wonju National University, Gangneung, Republic of Korea
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The accelerating emissions of greenhouse gases-particularly carbon dioxide (CO₂)-pose serious challenges to global environmental sustainability, with China being a major contributor due to its rapid economic and financial expansion. This study investigates the nexus between financial development, renewable energy consumption, and CO₂ emissions in China over the period 1996-2022. Using advanced time series econometric methods, including Dynamic Ordinary Least Squares (DOLS), Fully Modified Ordinary Least Squares (FMOLS), Canonical Cointegration Regression (CCR), and Granger causality analysis, the research aims to uncover the long-run relationships and causal directions among economic growth, financial development, renewable energy use, human capital, agricultural productivity, and carbon emissions. The findings reveal five key results: (1) economic growth is positively associated with CO₂ emissions, confirming an environmental trade-off; (2) financial development also significantly increases emissions, indicating potential ecological risks from financial sector expansion; (3) renewable energy consumption significantly reduces CO₂ emissions, confirming its role in promoting environmental quality; (4) human capital and agricultural productivity both contribute to emission reduction; and(5) causality tests show unidirectional and bidirectional relationships among variables, highlighting the interdependence of energy, finance, and environmental dynamics. The study concludes that China can reduce carbon emissions without sacrificing growth by accelerating renewable energy adoption, investing in green technologies, and promoting sustainable agricultural practices through targeted environmental and economic policies.
Keywords: Climate Change, CO2 emissions, economic growth, Renewable Energy, China
Received: 17 Mar 2025; Accepted: 18 Jul 2025.
Copyright: © 2025 Sun, Zhao and Gao. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
* Correspondence: Liya Gao, Gangneung–Wonju National University, Gangneung, Republic of Korea
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