**1. Introduction**

The issue of global warming has attracted worldwide attention. It is widely thought that this problem is caused by the excessive emission of greenhouse gases (GHGs), especially carbon dioxide. Many scholars have investigated the relationship between economic growth and carbon emissions, and have tried to determine how to mitigate this circumstance. The most well-known perspective is the environmental Kuznets curve (EKC) hypothesis proposed by Grossman and Krueger [1], which considers an inverted U-shaped relationship between the level of economic development and environmental quality. Many studies have validated the EKC hypothesis [2–4]; however, some scholars have proposed doubts or opposite opinions [5–7].

Many scholars have concentrated on the factors influencing carbon emissions, such as trade openness, urbanization, and population growth. In recent years, scholars have proposed that financial development is another important factor that could significantly affect carbon emissions, and the omission of a financial factor may lead to erroneous empirical results [8,9]. Therefore, scholars have conducted a series of studies on the influence of financial development on carbon emissions with different methodologies, indexes, and samples. The relevant research has not yet reached a consistent conclusion.

In this study, we analyzed the relationship between financial development and carbon emissions from a global perspective, on which scholars have rarely focused. We further divided the sample countries into two groups: developed countries, and emerging market and developing countries, which allowed us to detect the national differences in a unified framework.

The rest of this paper is arranged as follows: Section 2 provides a literature review, Section 3 describes the empirical strategy and sample data, Section 4 provides the empirical results and discussion, Section 5 outlines the robustness checks, Section 6 discusses the empirical results, limitations and further research direction, and Section 7 provides the conclusion and policy implications.

#### **2. Literature Review**

#### *2.1. Theoretical Perspective*

From the theoretical perspective of the influence of financial development on carbon emissions, scholars have proposed contradictory viewpoints. Some scholars [8,10,11] report that financial development could help reduce carbon emissions because of the following aspects: (1) in order to reduce production costs and enhance the market competitiveness of products, enterprises need to periodically update production technology and equipment which rely on adequate financial support. A developed financial system could facilitate enterprises to complete these works by effectively mitigating their financing constraints, which further indirectly decrease energy costs and reduce carbon emissions; (2) for the purpose of coping with environment degradation, governments generally tend to launch various environmentally friendly projects, promote overall industrial transformation, and the use of clean energy. Based on the corresponding policy arrangement, the financial institutions could provide necessary funds for the operation of these projects or programs, which could help to improve the energy infrastructure and finally reduce carbon emissions; (3) the enterprises listed on the stock market are generally outstanding enterprises which have significant influence on national economy. Due to the requirement of the stock exchange, they need to undertake regular information disclosure and are subject to strict supervision of the financial authorities and the public. This enforces them to establish a good image, such as assuming the social responsibility of environmental protection by utilizing environmentally friendly technologies, which could reduce carbon emissions. These can be called the "negative effects" of financial development on carbon emissions.

Other scholars [12–14] consider that financial development increases carbon emissions due to the following reasons: (1) a well functioned financial system could effectively relieve the problem of information asymmetry, expand financing channels, to enable the enterprises to obtain lending capitals with much lower costs which facilitate their expansion of the production scale (such as building a new production line, renting more equipment, and employing more workers), and therefore significantly increase carbon emissions; (2) likewise, the development of the financial sector could provide more and better service of consumption credit, which facilitates their intertemporal consumption and encourages them to purchase more commodities such as properties, automobiles, and other electric appliances. These would dramatically promote the expansion of social consumption and further increase carbon emissions; (3) the stock market generally acts as an important barometer of economic conditions, good performance of the stock market often implies the rapid growth and prosperity of the economy, which in turn greatly enhances the confidence of enterprises and consumers and stimulates the activities of production and consumption, therefore leading to the increase of energy consumption and carbon emissions. These can be called the "positive effects" of financial development on carbon emissions.
