Environmental sustainability has become a pressing concern for policymakers, and addressing climate change requires understanding the key determinants of environmental degradation. Despite extensive literature on sustainable finance-environment linkages, there is limited empirical evidence on the joint role of green finance and regulatory quality in shaping carbon emissions in a sample of 23 countries belonging to the Organization for Economic Cooperation and Development (OECD). Therefore, this study examines the impact of green finance and regulatory quality on consumption-based carbon emissions across OECD countries from 2000 to 2022. The findings show that green finance significantly reduces emissions across quantiles, with stronger effects at higher emission levels. Regulatory quality also shows a significant negative effect on emissions. Moreover, the interaction term indicates that green finance and regulatory quality are complementary and that the combined effect is stronger at higher quantiles. These results suggest that combined policy approaches are more effective for emission reduction than individual mechanisms. Policymakers should focus on both sustainable finance and regulatory frameworks to accelerate emission reductions and achieve climate targets.
Su et al. (Mon,) studied this question.