The Impact of Carbon Credits on Financial Growth in Diverse Economies

Abstract

This study investigates the influence of carbon credit mechanisms on the financial growth trajectories of diverse economies, encompassing both developed and developing nations. By examining economic data from carbon markets, environmental taxation policies, and sustainability investment flows, the research explores how participation in carbon credit trading affects GDP growth, investment patterns, and green sector development. The analysis employs a comparative econometric approach across multiple regions with varying carbon credit adoption levels, revealing that economies integrating carbon credits within fiscal and regulatory frameworks tend to experience enhanced financial resilience, increased foreign investment in sustainable sectors, and stronger alignment with global environmental targets. However, disparities are noted in institutional capacities and market access between high-income and low-income countries, highlighting the need for policy harmonization and capacity building. The study contributes to the discourse on carbon finance by offering insights into how market-based climate solutions can drive inclusive and sustainable economic growth.