The role of stock markets on environmental degradation: A comparative study of developed and emerging market economies across the globe

Sudharshan Reddy Paramati (Lead / Corresponding author), Md Samsul Alam, Nicholas Apergis

Research output: Contribution to journalArticlepeer-review

44 Citations (Scopus)
222 Downloads (Pure)

Abstract

It is well established in the literature that stock markets increase both economic activities and energy consumption across countries. Therefore, it is commonly believed that stock markets are expected to have a significant effect on CO2 emissions. However, it is not known whether these stock markets can contribute to more or less CO2 emissions. Hence, the goal of this study is to examine the impact of stock market indicators on CO2 emissions across a global panel of both developed and emerging market economies. The results establish that stock market indicators have a significant negative and positive impact on carbon emissions in developed and emerging market economies, respectively. Furthermore, the findings illustrate the presence of the Environmental Kuznets Curve (EKC) hypothesis, implying that stronger stock markets lead to a further decline in carbon emissions. Given these findings, the study argues that the role of stock markets in the abatement of CO2 emissions significantly varies across both developed and emerging market economies. Significant implications have to do with the fact that developed markets might have initiated effective policies on listed firms to minimize carbon emissions, while emerging markets are yet to achieve this.

Original languageEnglish
Pages (from-to)183-200
Number of pages18
JournalEmerging Markets Review
Volume35
Early online date17 Dec 2017
DOIs
Publication statusPublished - Jun 2018

Keywords

  • CO emissions
  • Developed-emerging market economies
  • EKC hypothesis
  • Stock market indicators

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