AS DECREASING ENERGY CONSUMPTION

While most carbon emission reduction policies turn to decrease energy consumption, researchers Dr. Misbah Sadiq, Professor at the College of Business Administration, at UAE’s Umm Al Quwain University, and Dr. Umar Nawaz Kayani Professor at Al Ain University believe that this alone is not enough, governments and policymakers need to encourage businesses to create goods with reduced carbon emissions.

The paper entitled, “Examining the Relationship between Economic Growth, Financial Development, and Carbon Emissions: A Review of the Literature and Scientometric Analysis” while prior research has shown a negative correlation between financial development and green growth; green technology, green businesses, financial systems, and low carbon economic policies can play a positive effect on reducing carbon emissions.

The research using the bibliometric technique analyzed

Al Quwain University Assistant Professor, College of Business Administration

the literature and found that most experts agree that a flourishing economy and expanding financial sector led to more pollution. When economies expand, their energy demands rise, as do their emissions of greenhouse gases. Large-scale infrastructure projects or the rise of extractive industries are two examples of how financial development might make it easier to fund endeavors that could otherwise increase carbon emissions. Yet, there is not a simple connection between GDP growth, improved financial systems, and increased carbon emissions.

However, the research paper also concluded that businesses choose to increase output through financing rather than create energy-saving solutions. As such long-term policies should be developed to assist the financial sector and environmental conservation, striking a balance between the two goals in light of each country’s unique circumstances and the global climate change crisis.

Dr. Sadiq explains, “There is no simple connection between GDP (Gross Domestic Product) growth, improved financial systems, and increased carbon emissions. The use of renewable energy sources like wind and solar power, for instance, may aid in cutting down on carbon emissions even as they contribute to economic development. Carbon taxes and cap-and-trade systems are two examples of policy interventions that have been shown to encourage businesses to decrease carbon emissions while maintaining profitability. We also believe that governments should prioritize allocating resources for cultivating technical growth in the industrial sector through investment loans creating goods with reduced carbon emissions.”

He adds, “Additional options include granting subsidies for the implementation of “green” technology or encouraging the growth of energy output from renewable sources like hydro, solar, and wind. As a result, governments should prioritize policies that combine financial incentives with regulatory measures to reduce carbon dioxide emissions.”

Recommendations

The paper recommends that governments including UAE, should prioritize policies that combine financial incentives with regulatory measures to reduce carbon dioxide emissions. As a preliminary step, developing the capabilities for trustworthy information collection and analysis is necessary so that national institutions can establish precise estimates of emissions and projections under different mitigation scenarios. Coordination between government agencies, think tanks, academic institutions, and businesses is the next step .”

The use of renewable energy sources like wind and solar power, for instance, may aid in cutting down on carbon emissions even as they contribute to economic development.

The research also found that while a large number of research has been conducted to investigate the connection between economic growth, financial development, and carbon emissions in certain nations, there is still a need for further comparative studies. This kind of analysis might be helpful in identifying parallels and variations in the techniques followed by various nations and areas to encourage sustainable economic development while simultaneously lowering carbon emissions.

More study on the efficacy of policy interventions in lowering carbon emissions while simultaneously fostering economic growth and financial development is required.

How can the UAE benefit?

The UAE has already been taking pertinent steps towards addressing climate change and promoting sustainability. Based on a study entitled “Foreign Direct Investment Settlement, Novel Energy Methods, and CO2 Emissions: Evidence from United Arab Emirates”, Dr Sadiq believes that clean energy should be a key initiative in the UAE. The findings of this research endorse the initiative of the UAE launched “Energy Strategy 2050.”

The UAE has recognized the importance of diversifying its economy and reducing its reliance on fossil fuels. They have made investments in renewable energy sources, particularly solar and nuclear power, which may aid in cutting carbon emissions and contributing to economic development.

Sadiq adds, “The UAE may apply carbon taxes and capand-trade systems which are two examples of policy interventions that have been shown to encourage businesses to decrease carbon emissions while maintaining profitability. In addition, the UAE may set some policies for the financial sector like banks and other financial organizations to lead the charge to save the planet. For those who can implement energy-efficient technology, for instance, they may be able to provide low-interest loans to contribute more towards sustainability.”

They have made investments in renewable energy sources, particularly solar and nuclear power, which may aid in cutting carbon emissions and contributing to economic development.

Future Research

The biggest takeaway from the research is that while studies have shown that there is a complicated web of interconnections between GDP growth, financial development, and carbon emissions, some research indicates a positive relationship between economic growth and financial development and carbon emissions, other studies suggest a potential inverted U-shaped relationship between economic growth and carbon emissions with emissions rising alongside economic expansion but leveling off after a certain threshold is crossed.

As such in the future Sadiq believes it is important to determine the effect that advances in technology have on lowering carbon emissions while simultaneously fostering economic expansion and monetary growth.

He also calls for more international collaboration between countries to strike a balance between economic development and environmental sustainability.

For those who can implement energy-efficient technology, for instance, they may be able to provide low-interest loans to contribute more towards sustainability.

Finally, when it comes to financial institutions in the UAE and other countries including banks and insurance firms, research might investigate the influence that green finance efforts, such as sustainable investment funds and green bonds, have on the rate of carbon emissions reduction and the promotion of sustainable economic development. This could include studies that investigate the possibility of financial institutions using their power to encourage environmentally responsible behavior among the businesses in which they have invested.