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ORIGINAL RESEARCH
Sustaining Our World: Unraveling the Impact
of Financial Inclusion, Urbanization, and Natural
Resource Depletion on Environmental
Degradation
1
College of Theoretical Economics Shenzhen University, Shenzhen 518060, Guangdong, China
2
Department of Economics, University of Religions and Denominations, Qom 37491-13357, Iran
3
Jiangxi Science and Technology Normal University, Nanchang, China
Submission date: 2024-02-23
Final revision date: 2024-04-02
Acceptance date: 2024-05-13
Online publication date: 2024-09-04
Publication date: 2025-01-28
Corresponding author
Furman Ali
International Education, Jiangxi Science and Technology Normal University,, Nanachang, China
International Education, Jiangxi Science and Technology Normal University,, Nanachang, China
Pol. J. Environ. Stud. 2025;34(3):3157-3171
KEYWORDS
environmental degradationfinancial inclusionTOPSISG7 economiesurbanizationnatural resource depletion
TOPICS
ABSTRACT
This study examines the dynamic impact of financial inclusion (FIN), urbanization (URP), and
natural resource depletion (NR) on environmental degradation (CO2 emissions) in the group of seven
economies (G7) between 2000 and 2021. The study applies TOPSIS to develop a composite index for
FIN, focusing on three dimensions that determine the degree of financial inclusion. The CS-ARDL
model analysis indicates that a 1% increase in financial inclusion substantially enhances environmental
sustainability by reducing carbon emissions by 0.4% in the long run and 0.04% in the short run.
However, a 1% increase in urbanization and natural resource depletion leads to an escalation of CO2
emissions by 0.89% and 0.29%, respectively, in the long run, while having a relatively smaller impact
on the environment in the short run. Furthermore, by testing the non-linear association between FIN
and CO2, we find the presence of a financial inclusion-based Environmental Kuznets Curve (EKC).
To ensure the reliability of the result, we utilize two additional second-generation econometric models:
AMG and CCEMG. The casual dimensions have revealed that FIN, URP, and NR have bidirectionally
Granger caused environmental degradation. The study results discussed various policies based
on the FIN, URP, and NR outcomes to improve environmental quality for sustainable development.
CONFLICT OF INTEREST
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
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