Do financial development and energy structure matter for environmental sustainability? Asymmetric evidence from BRICS countries

This study examines the asymmetric interplay between financial expansion (FIN), renewable energy (RE) consumption, fossil fuel (FF) use, and carbon dioxide (CO 2 ) emissions in BRICS countries over the period 1990–2024. Using the Nonlinear Autoregressive Distributed Lag (NARDL) approach, the analysis captures both short-run and long-run asymmetries arising from positive and negative shocks in the explanatory variables. The empirical results confirm the existence of a long-run cointegration interplay among the variables. FIN is found to exacerbate environmental degradation (ED), with positive shocks exerting a stronger effect on CO 2 emissions than negative shocks. In contrast, RE consumption significantly mitigates emissions, although its impact is gradual and more pronounced in the long run. FF consumption remains the dominant driver of CO 2 emissions, with substantial asymmetric effects. Additionally, economic growth (EG) exhibits a nonlinear pattern consistent with the early stage of the Environmental Kuznets Curve (EKC) hypothesis. The findings underscore the importance of incorporating asymmetries in environmental policy design and highlight the critical role of green finance and RE transition in achieving sustainable development in BRICS economies.