EMPIRICAL EVIDENCE ON NEXUS BETWEEN CLIMATE FINANCING AND BIOLOGICAL CAPACITY

Abstract

This study examines the influence of key economic and environmental indicators on bio-capacity, representing the biological health of planet Earth, or the regeneration capacity of planet Earth, using panel data from selected countries spanning the years 1995 to 2021. Employing a random effects model, the analysis investigates the relationships among Renewable Energy Consumption (REC), Climate Finance Received (GCF), Carbon Footprint (CFP), and GDP Growth (pc1_gdp), alongside variables such as Population Density (PD) and Patent Applications (Pat). The results reveal a positive and significant relationship between REC and bio-capacity, highlighting the critical role of renewable energy in enhancing ecological health and sustainability. Conversely, the analysis shows a negative association between GCF and bio-capacity, suggesting challenges in effectively utilizing climate finance to achieve measurable improvements in biological health. Furthermore, the negative impact of CFP emphasizes the urgent need for policies to reduce carbon emissions to enhance ecological integrity. While GDP growth exhibits a positive but context-dependent relationship with bio-capacity, the findings advocate for policies that promote renewable energy investments, optimize climate finance utilization, implement carbon pricing mechanisms, and strengthen environmental regulations. This study contributes valuable insights for policymakers seeking to balance economic development with ecological sustainability, ultimately working toward improved biological health for the planet.