Green Finance, Innovation, and Environmental Sustainability in India: A Dynamic ARDL Simulation Approach

This study investigates the dynamic relationship between CO₂ emissions and key macro-environmental variables in India from 1990 to 2022 using the Dynamic ARDL Simulation approach. The model confirms a stable long-run equilibrium, with an error correction term of −0.337 indicating a 33.7% annual adjustment rate. In the short run, green finance significantly reduces emissions, while GDP growth increases them. Technological innovation, renewable energy, urbanization, and education show no immediate impact. However, long-run estimates reveal that technological innovation (0.275) and GDP (0.944) raise emissions, while green finance (−0.518), renewable energy (−0.355), urbanization (−0.433), and education (−0.948) significantly reduce emissions. These results underscore the need for India to align technological progress and economic growth with sustainable practices, redirect finance toward low-carbon pathways, and invest in clean energy and education.