IMPACT OF BANKING ACTIVITIES ON CARBON (CO2) EMISSIONS: EUROPEAN UNION ANALYSIS

Abstract

This study analyses the impact of the financial sector on environmental sustainability in the Euro Area (EU27). The data used for the study includes data for 27 European countries covering the period between 2006 and 2022. These data are taken from the World Bank and EDGAR (Emissions Database for Global Atmospheric Research) database. The data were analysed using EViews 13 (Quantitative Micro Software). Panel Data Regression Method was used to determine the relationship between the series. It is seen that the number of bank branches and ATMs and the increase in loan volume, which show positive changes over the years in the banking sector, directly positively affect the amount of CO₂ emissions within the determined period. While a one-unit increase in loan volume increases CO₂ emissions by 0.3%, a one-unit increase in the number of branches of banks increases CO₂ emissions by 0.7% and a one-unit increase in ATMs increases CO2 emissions by 0.03%. These results show that the banking sector has a significant impact on environmental impact. Even though environmentally friendly practices such as solar-powered ATMs, carbon footprint tracking and environmentally friendly practices are being implemented in the banking sector, whether this is successful or not should be reflected in CO₂ emission data. Measures such as sustainable credit policies, green branch networks, technological transformation and green investment strategies can help to achieve CO₂ emission targets.