The Role of Financial Development and Manufacturing Sector Expansion on Emission Reduction for Sustainable Economic Development in the World’s Biggest Emitter Asia

Abstract

Manufacturing has played an imperative role on world’s economic development even in Asia.
Massive expansion of this industrialization impact, enforces Asia to be the world’s biggest
emitter because of the presumption as the major determinant of Carbon dioxide (Saidi &
Mbarek) emissions. Instead of expected to accelerate high economic growth, it has left a harmful
impact which threaten our environment sustainability. On the other side, the effect of
globalization stimulates the evolution of financial development with debatable impact on the
environment. Some argues that financial development supplies additional funding to boost
production economic of scale particularly in manufacturing sector resulting CO2 emissions
enhancement. On the contrary, the others assumes that environmentally friendly technology
supported by adequate financial development can stimulate efficient production process which
can protect the environment. Therefore, this study aims to analyze the effect of manufacturing
sector expansion and financial development on CO2 emissions in Asia during 2009-2018 by
using System Different Generalized Method of Moment (Sys-GMM) dynamic panel model. This
study result shows that financial development negatively effects CO2 emissions, moreover it can
minimize negative effect of manufacturing sector expansion on CO2 emissions reduction in line
with the actualization of the 13th goal of Sustainable Development Goals (SDGs)