The nexus between climate policy uncertainty and load capacity factor in China with the moderating role of financial development

OpenAlex İngilizce

Abstract The current study explores the role of financial development and climate policy uncertainty on environmental quality in China, one of the countries with the highest levels of environmental pollution, during the period 1990—2021. This study uses the load capacity factor to indicate environmental quality, while financial development and climate policy uncertainty, energy consumption and economic growth, are considered as explanatory variables. Two different models are constructed to explore the mediating role of financial development and climate policy uncertainty on environmental quality. Analyses are performed using the A-ARDL approach and the FMOLS long-term estimator, and the DOLS analysis is utilized for robustness. The findings obtained using different approaches support each other. According to the empirical results, financial development and climate policy uncertainty reduce environmental quality in China, but improve it when the interaction variable is integrated into the model. This finding implies that the association between financial development and climate policy uncertainty can play a balancing role in ensuring environmental sustainability.