An Empirical Estimation of Clean Energy and Financial Development as Determinants of Sustainable Development in Iraq

Abstract

In light of the current circumstances surrounding global warming and the rapid onset of climate change, the imperative for sustainable development has emerged as a pressing concern. In pursuit of this objective, numerous factors are suggested during climate change summits and conferences as potential measures to mitigate significant environmental risks and facilitate the attainment of sustainable development. The present study aims to evaluate the importance of clean energy and financial development in the context of achieving sustainable development in Iraq from 2000 to 2022. In addition, this current study investigates the significance of non-renewable energy sources and their impact on economic growth within the context of sustainable development. The initial analysis indicates that the Augmented Distributed Lag Model (ARDL) may be suitable for application in this study. Based on the results obtained from the ARDL estimation, it was determined that financial development has a statistically significant and negative influence on sustainable development. Conversely, clean energy was found to have a statistically significant and positive impact on sustainable development. Non-renewable energy sources and economic growth have been identified as factors that can impede sustainable development. However, it has been observed that there is a positive relationship between the quadratic term of growth and the increase in sustainable development. The post-estimation diagnostics, which encompass stability and coefficient diagnostics, have demonstrated the suitability of the empirical analysis. Based on the research findings, it is advisable for policymakers and the government of Iraq to actively encourage the utilization of clean energy resources through the implementation of effective energy policies. Additionally, it is recommended that the financial sector of Iraq transition its financing facilities to prioritize environmentally friendly and sustainable production practices and activities.