Climate Change, Fiscal Action, and Financial Access: Unpacking Emissions Drivers in Asian Economies

Climate change remains one of the most pressing global challenges, with rising carbon emissions contributing significantly to environmental degradation and economic vulnerabilities. This study examines the effectiveness of government fiscal measures in mitigating climate change in Asian economies from 2004 to 2022. The study uses robust panel econometric methods, cross‐sectional augmented autoregressive distributed lags (CS‐ARDL), generalized method of moments (GMM), moments of quantile regression (MMQR), and the dynamic common correlated effects (DCCE) to capture heterogeneous and country‐specific impacts at various carbon emission levels. The empirical findings demonstrate that fiscal policy and financial inclusion exert significant long‐run effects on emissions, with their direction and magnitude varying by country, while foreign direct investment (FDI) and consumption demonstrate mixed impacts. Moreover, MMQR analysis uncovers FDI's notable and variable effects on rising carbon emissions across quantiles. The DCCE robustness checks analysis confirms the consistency of these associations while uncovering substantial heterogeneity. These findings are critical for climate change mitigation, highlighting specific policies needed for financial inclusion and FDI to guarantee green economic changes and SDG (13) achievement in Asia. The study, therefore, emphasizes the enhancement of green fiscal measures to stimulate green financing policies to ensure green FDI and sustainable economic development.