Does insurance sector development improve environmental quality? Evidence from BRICS.
Isaac Appiah-Otoo1, Alex O Acheampong2,3
1School of Management and Economics, Center for West African Studies, University of Electronic Science and Technology of China, Chengdu, China. appiahotooi@yahoo.com.
Environmental Science and Pollution Research International
|February 8, 2021
Summary
Insurance sector growth increases carbon dioxide emissions (CO2E) in BRICS nations. A 10% rise in composite insurance development spurs a 2% CO2E increase, highlighting the need for green insurance policies.
Area of Science:
- Environmental Economics
- Financial Development Studies
Background:
- Limited research exists on the insurance sector's impact on carbon dioxide emissions (CO2E).
- Previous studies focused on banks, bonds, and stocks' effects on CO2E.
Purpose of the Study:
- To investigate the relationship between insurance sector development and CO2E in BRICS countries.
- To quantify the impact of life, non-life, and composite insurance development on CO2E.
Main Methods:
- Econometric analysis using the instrumental variable generalized method of moments (GMM) model.
- Data collected for BRICS nations (Brazil, Russia, India, China, South Africa) from 2000 to 2016.
- Robustness checks with alternative estimators and CO2E proxies.
Main Results:
- Insurance sector development generally spurs CO2E in BRICS.
- A 10% increase in life insurance development correlates with a 1% rise in CO2E.
- A 10% increase in non-life insurance development correlates with a 4% rise in CO2E.
- A 10% increase in composite insurance index correlates with a 2% rise in CO2E.
- Population, trade, and energy consumption increase CO2E, while economic growth decreases it.
Conclusions:
- Insurance sector growth is a significant driver of CO2E in BRICS.
- Policies promoting green insurance consumption are recommended to mitigate environmental impact.
- Further research into sustainable financial instruments is warranted.
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