DETERMINANTS OF CO2 EMISSIONS IN G20 ECONOMIES: THE ROLE OF FINANCIAL DEVELOPMENT, TECHNOLOGICAL INNOVATION, RENEWABLE ENERGY, AND DEMOGRAPHIC DYNAMICS

Abstract

This study examines the long- and short-run effects of financial development, technological innovation, renewable energy consumption, economic growth, and demographic pressure on CO₂ emissions in G20 economies over 1990–2021 using a Panel Mean Group ARDL framework. Panel cointegration tests confirm the existence of a stable long-run relationship among the variables. The results show that renewable energy consumption is the most effective and immediate driver of emission reduction, while financial development and technological innovation contribute to decarbonization primarily in the long run. In contrast, economic growth remains strongly emission-intensive, reflecting persistent scale effects. Population size exerts upward pressure on emissions, whereas the effects of urbanization depend on the stage of economic development. Robustness checks using alternative financial and innovation proxies, CCE/DCCE, CS-ARDL estimators, sub-period analysis, and the exclusion of the United States and China confirm the stability of the findings. The results underscore the need for differentiated climate strategies that integrate renewable energy expansion, innovation-oriented finance, and institutional reforms across heterogeneous G20 economies.