How does financial risk affect global CO2 emissions? The role of technological innovation

To empirically verify whether financial risk affects global carbon emissions, this study investigates the financial risk-emission nexus by employing a global balanced panel dataset of 62 countries over the period 2003-2018. Furthermore, we explore the mediation effect of technological innovation on the financial risk-emission nexus. Fully considering potential regional heterogeneity and asymmetry, this study further analyzes the heterogeneous and asymmetric relationships among the variables, such as the difference between regional comprehensive economic partnership countries and other countries. The empirical results indicate that: (1) a mediation effect between financial risk and global carbon emissions exists; in other words, increased financial risk not only reduces global carbon emissions directly, but can also have an indirect impact in mitigating carbon emissions by promoting technological innovation; (2) the impacts of financial risk and technological innovation on global carbon emissions show significant regional heterogeneity; and (3) financial risk and technological innovation show asymmetry across different quantiles. To be specific, technological innovation and financial risk have a significant inhibitory effect on global carbon emissions only in the 10th quantile, while promoting carbon emissions in other quantiles.