The Impact of Financial Development, Political Stability and Foreign Direct Investment on Greenhouse Gas Emissions in BRICS Countries

Abstract

This study examines the effects of financial development, political stability, renewable energy, foreign direct investment, and national income on greenhouse gas emissions in the BRICS countries by employing the Augmented Mean Group (AMG) estimation method over the period 2002–2021. The BRICS countries have become an important focus of environmental economics research due to their remarkable economic growth performance and the environmental challenges associated with their intensive industrialization processes. Although previous studies have extensively explored the relationship between economic growth and environmental degradation in these countries, limited empirical evidence exists regarding the environmental implications of the interaction between financial development and political stability. The empirical findings indicate that financial development, political stability, and national income contribute to higher GHG emissions, whereas renewable energy and foreign direct investment have mitigating effects on GHG emissions. Furthermore, unlike the findings reported in earlier studies, the interaction between financial development and political stability is found to increase GHG emissions. Considering these findings, the study suggests that BRICS countries should develop renewable energy policies that support economic growth while simultaneously reducing emissions in order to alleviate the adverse environmental consequences associated with economic expansion.