Synergistic effects of energy financing and good governance on carbon emissions
Abstract
• Study examines how energy finance and governance affect carbon emissions in BRICS. • Fossil fuel finance raises CO2, while renewable energy and good governance lower it. • Synergistic effects show configurations that lead to high carbon emissions. • Shifting to renewables, improving governance, and finance cuts CO2 emissions. • Specific conditions causing high emissions guide policies for BRICS' sustainability. This study examines the synergistic effects of energy finance and good governance on carbon emissions in BRICS countries, addressing the urgent challenge of balancing economic growth with environmental sustainability. The analysis was conducted using panel data for 1997-2020 years applying econometric models (FMOLS) alongside fsQCA, reveals both positive and negative effects of energy finance. Specifically, energy finance directed toward fossil fuels significantly increases carbon emissions, while finance for renewable energy and good governance reduces emissions. The fsQCA identifies three distinct pathways leading to high emissions, emphasizing that no single factor drives carbon emissions, but rather a combination of economic, energy, and governance factors. Quantitatively, for every 1% increase in renewable energy finance, carbon emissions decrease by 0.293%, while good governance reduces emissions by 0.028%. But 1% increase in fossil fuel energy finance leads to 0.335% carbon emissions. These findings accentuate the need for an integrated approach, where BRICS policymakers prioritize renewable energy investments, strengthen governance, and promote sustainable financial mechanisms to meet carbon reduction goals. By providing specific pathways to mitigate emissions, the study offers actionable insights for achieving long-term environmental sustainability in these rapidly growing economies.