Toward Environmental Sustainability in Pakistan: The Role of Green Technological Innovation, Green Finance, and Financial Development

Abstract

This study examines how green technology innovation (GTI), green finance (GF), gross domestic product (GDP), and financial development (FD) affect environmental quality in Pakistan using annual data from 1990 to 2024. Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL (NARDL) models estimate symmetric and asymmetric long-run relationships for five environmental indicators; carbon dioxide emissions, ecological footprint, methane emissions, nitrous oxide emissions, and deforestation. ARDL estimates show that GTI, GF, and FD are negatively associated with environmental degradation, whereas GDP is positively associated with it, consistent with the rising segment of the environmental Kuznets curve. NARDL results confirm asymmetry in the GTI–environment nexus; positive shocks to GTI reduce emissions, while negative shocks increase them. Policymakers should scale up public and private investment in green technology, expand green financing instruments such as green bonds and concessional credit, and tie financial-sector growth to environmental disclosure standards so that economic expansion does not raise emissions.