E. I. Evbayiro-Osagie

This study examined the effect of financial development and carbon financing on carbon emission in Sub-Sahara Africa. The study adopted stratified sampling technique. The population of the study is the Sub-Sahara African Countries, while the sample of the study was made up of seven (7) Sub-Saharan African Countries. The study employed secondary data collected from World Bank Development Indicators (WBDI) and the International Monetary Fund (IMF) Financial Structure Database. In order to present a robust outcome in the relationships, the pooled mean group (PMG) technique which is an autoregressive distributed lags (ARDL) approach to panel data estimation was adopted for the empirical analysis. However, the presence of cross-sectional dependence in the panel data ensured that the panel correlated standard errors (PCSE) technique was used for robustness tests. Data used for the study is annual panel data for seven SSA countries with developing capital markets covering the period of 2000 to 2023. The findings from the study revealed that financial development exerts divergent effects on carbon emissions in Sub-Sahara African Countries. In particular, the study found that the level of financial liquidity supports sustainability by significantly reducing carbon emissions in SSA, private credit allocation still favours high-emission activities in the region. Thus, it shown that increased credit penetration significantly increases carbon emission. The economic implication is that, financial deepening mitigates climate degradation in SSA economies while the standard of credit and formal funds allocation is highly inefficient in addressing the climate crisis in SSA. The study recommends that, financial flows in SSA countries should be directed toward sustainable sectors while disincentivising carbon-intensive financing either through regulations or explicit incentive measure.