The role of renewable energy consumption and financial development in environmental sustainability: implications for the Nordic Countries

The Nordic nations have yet to significantly contribute to achieving Sustainable Development Goals (SDG) 7 and 13. This predicament might be attributed to fundamental financialization concerns in these nations and renewable energy generation implementation issues. The Nordic nations are fighting to reduce CO2 emissions as a result of these two situations. Dealing with this problem may necessitate a policy shift, which represents the focus of this research. Utilizing data from 1980 to 2020, we analyze the heterogeneous impacts of financial development and renewable energy on CO2 emissions using advanced panel and time-series methodologies. The advantage of the wavelet tools (wavelet coherence, partial wavelet and multiple wavelet techniques) is that they help to capture policy initiatives at different frequencies, i.e., short, medium and long-term. Our empirical outcomes from the CS-ARDL show that both financial development and renewable energy decrease CO2 emissions in the short and long term. Furthermore, the outcomes of the wavelet coherence show negative co-movement between CO2 and renewable energy in each Nordic nation except for Iceland with renewable energy driving CO2 in all frequencies. Additionally, financial development enhances the ‘CO2 emissions-renewable energy consumption’ association, but in the short term, it has no stimulating effect. These findings lead to the recommendation of an SDG-oriented policy framework. While this policy agenda is designed to achieve SDGs 7 and 13, it may also be applied to other nations. The study recommends that the Nordic countries implement measures to boost renewable energy supply through enhanced renewable energy technologies.Abbreviations: ASEAN: Association of Southeast Asian Nations; BRICS: Brazil, Russia, India, China and South Africa; CO2: Carbon Emissions; CS-ARDL: Cross Sectional Autoregressive Distributed Lag Model; FD: Financial Development; PMG-ARDL: Pool Mean Group Autoregressive Lag Model; VAR: Vector Autoregressive; VECM: Vector Error Corrected Model; MINT: Mexico, Indonesia, Nigeria and Turkey; REC: Renewable Energy; SDG: Sustainable Development Goal; SD: Sustainable Development