Greening Growth in the Digital Age: The Role of Green Finance and ICT in Reducing Carbon Emissions in Developed Economies
DOI:
https://doi.org/10.54938/ijemdss.2026.05.4.783Abstract
The transition toward a low-carbon development requires economies to balance financial and technological advancement with the growing imperative of environmental sustainability. Despite increasing scholarly attention to green finance (GFI) and digitalization, their joint implications for carbon emissions, particularly in the context of economic growth (GDP), industrialization (IND), and trade openness (TO), remain insufficiently explored across developed economies. This study investigates the effects of GFI, ICT, GDP, IND, and TO on CO₂ emissions in 12 developed economies from 2015–2024. Using a balanced panel of 120 observations, the study applies second-generation panel diagnostic tests and PCSE as the main estimator, with FGLS used for robustness checks. The findings indicate that GFI, ICT, and TO significantly mitigate CO₂ emissions, emphasizing the potential of green financial development, digital transformation, and trade integration to enhance environmental sustainability. In contrast, GDP and IND are found to significantly raise emissions, signifying that conventional growth and industrial expansion continue to exert substantial environmental pressures. The FGLS results support these findings, although the positive effect of industrialization is no longer statistically significant. Collectively, the evidence underscores the importance of expanding green finance, accelerating digital transformation, and fostering environmentally responsible trade while instantaneously decoupling economic and industrial growth from carbon-intensive activities. These procedures can help developed economies strengthen their pathway toward sustainable development and long-term carbon neutrality.
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Copyright (c) 2026 Aqsa Ramzan, Muhammad Kashif Khurshid , Faisal Yousaf , Musaddiq Hussian
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