Does financial development support renewable energy consumption: Evidence from the UK

Abstract

This study explores the effects of financial development on the use of renewable energy (RE) in the United Kingdom (UK) between 1980 and 2020, by taking control variables such as urbanization and economic growth into account. For this purpose, wavelet transforms and the fresh Fourier quantile causality test are employed. Our empirical findings demonstrate that both immediately and over time, the use of renewable energy (REC) is stimulated by financial development. Additionally, financial institutions' efficiency and market depth play a significant role in encouraging the REC. In line with the study's general conclusions, it is suggested that the UK should implement policies that increase the spread and effectiveness of financial institutions and financial markets in order to support environmental quality. By using novel approaches, the study investigates the effects of six sub-indicators, namely the effectiveness, depth, and accessibility of financial markets and institutions on the REC.