Impact of banking development and renewable energy consumption on environmental sustainability in Germany: Novel findings using the bootstrap ARDL approach

Abstract

This study examines the effects of banking development, economic growth and consumption of renewable energy on carbon dioxide (CO2) emissions and load capacity factor (LCF). Previous empirical studies have assessed the interrelationship between banking development and CO2 emissions; however, these studies have ignored supply-side ecological issues. To overcome this issue, this study evaluates the effect of banking development on LCF, which is considered to be one of the most comprehensive ecological proxies to date, including both biocapacity and ecological footprint (EF). Using the bootstrap autoregressive distributed lag model, the study reveals that renewable energy improves ecological quality in Germany. The results of the investigation demonstrate that the environmental Kuznets curve hypothesis is valid in Germany using CO2 emissions and LCF indicators. Furthermore, this study demonstrates that banking growth and renewable energy in Germany correlate with improved environmental quality. These findings provide policymakers with important insights. In this context, the study advises the banking industry and government authorities to leverage banking expansion to support green energy to achieve the national goal of zero CO2 emissions by 2045.

Keywords

• Bootstrap ARDL
• Germany
• Banking development
• Energy
• Load capacity factor