Financial Inclusion and Environmental Pollution in Türkiye: Fresh Evidence from Load Capacity Curve Using AARDL Method

Abstract

Sustainability is an important concept for the whole world. Generally, in order to measure the sustainability of the environment, carbon dioxide emissions and ecological footprint indicators are used. However, these variables do not reflect the supply side of natural resources. Therefore, load capacity factor is an important environmental indicator for a sustainability. Environmental assessment based on the load capacity factor is more meaningful. Besides, improved access to financial services can contribute to environmental sustainability. The effect of financial inclusion on the load capacity factor in Turkiye has not been examined in the current literature. In this context, this study analyzes the impact of financial inclusion, hydropower energy consumption, and life expectancy at birth on environmental sustainability from a different perspective by focusing on load capacity factor. To this end, this study used the newly developed Augmented ARDL method to determine the cointegration relationship between the series and measure the values of the long-term coefficients. Based on the Augmented ARDL method, there is a cointegration relationship between the series. In the long run, hydropower energy consumption reduces pollution, while financial inclusion decreases load capacity factor. The effect of life expectancy at birth on pollution is not significant. Moreover, the results reveal that the load capacity curve hypothesis is valid in Turkiye. As a result, the Turkish government should promote renewable energy sources, especially hydropower energy consumption, align financial services with pollution reduction measures, and contribute to the creation of an environmentally conscious society.