Financing the Future: How Green Investments and Environmental Taxes Drive Sustainable Growth

Abstract

This study examines the role of green finance captured through renewable energy consumption and environmental tax revenue in influencing economic growth and carbon emissions in Pakistan over the period 1995 to 2024. Using annual time series data, the analysis first applies unit root and Johansen Cointegration tests, confirming the presence of a stable long-run relationship among the variables.Long-run coefficients are estimated using Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS), both of which indicate that renewable energy consumption, environmental tax revenue, and capital formation exert a positive and statistically significant influence on GDP per capita.