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This study aimed to investigate the impacts of financial depth and foreign direct investment (FDI) on green and non-green energy consumption in the panel data of 14 Organization of the Petroleum Exporting Countries (OPEC) members over the period of 1990-2015. To overcome endogeneity and heterogeneity issues and increase robustness, we applied the panel-corrected standard errors (PCSE) method and the instrumental variable approach with fixed effects (IV-FE). The findings indicate a significant positive relationship between FDI and CO 2 E and negative relationships between FDI and access to renewable electricity (ATE) and access to improved sanitation (AISANIT). Furthermore, the findings on financial depth indicated a significant negative relationship between FDI and CO 2 E and positive relationships between FDI and ATE and AISANIT. The main conclusions suggest that increases in FDI lead to decreases in green energy consumption and increases in non-green energy consumption, while increases in financial depth lead to the opposite scenario.

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This paper aims to examine the impact of financial development on green and non-green energy consumption in the Organization of the Petroleum Exporting Countries (OPEC) over the period of 1990–2015.The data was collected from the Green Growth Knowledge Platform Database and the World Development Indicators (WDI) of the World Bank for 14 OPEC countries over the period of 1990–2015.We used two different proxies for financial development: (1) domestic financial development, measured by domestic credit in the private sector as a percentage of gross domestic product(GDP), and (2)foreign financial development, measured by the foreign direct investment (FDI) stock as a share of GDP. The main model developed three hypotheses; the first two were sub-hypotheses that characterized green energy through proxies: access to improved sanitation and access to electricity. The third hypothesis was anon-green (brown) energy proxy using CO2 emissions per capita. All three hypotheses used five control variables: by GDP per capita, urbanisation/total population ratio, oil rent/GDP ratio, investment/GDP per capita ratio and trade openness. In order to evaluate these hypotheses, we used the instrumental-variable (IV) approach with a fixed effect option to control for both endogeneity and heterogeneity, and we used the lags of the independent variables as instruments for financial development, as lagged variables are arguably exogenous. The impacts of financial development on environmental quality varied between foreign direct investments (foreign financial development) and the domestic credit ratio (domestic financial development). Our main results suggest that FDI degrades environmental quality in OPEC economies, and FDI represents a source of pollution by increasing CO2 emissions per capita (non-renewable) by about 0.0224% and decreasing non-renewable energy consumption variables. In other words, FDI’s non-renewable and renewable relationship supports the non-green growth hypothesis.JEL Classification B22. B26. D53. E21. F63. K32