Does Energy Intensity Affect the Relationship Between Financial Development and Environmental Pollution?

Abstract

This paper examines the role of energy intensity on the relation between financial development and environmental pollution for BRICS countries consists of the period 1990-2015. Financial development indicates the countries' currency capacities, which is significant for net energy importer countries that need currency to sustain their energy import. Additionally, for all countries, environmental degradation is important for sustainable growth. So in this study, we employ Panel Smooth Transition Regression Model (PSTR) to evaluate the “threshold” level of energy intensity which has vital role for consumption of energy. The findings indicate that for full sample there are three energy intensity threshold points. Above the threshold point (11.4%), an increment in financial development index causes more environmental pollution. However, below that energy intensity threshold point, an increase in financial development negatively affects environmental pollution. So this study may be a guide for decision makers and political authorities for sustainable energy supply and sustainable environment.