Study of Financial Development Impact on Carbon Dioxide Emissions in the Iranʼs Agricultural Sector

Nowadays, greenhouse gas emissions, especially carbon dioxide is one of the main challenges in the world. The agricultural sector is one of the important sectors of the Iran economy and emitter of this gas. Since the financial sector has a central role in the growth and development. Therefore, in this paper, the relationship between emissions of carbon dioxide with the financial development index in Iranʼs agricultural sector was investigated. Financial development index, gross domestic product (agricultural sector growth), gross domestic product to the power of two, energy consumption in agricultural sector and land area under new irrigation were considered as independent variables and carbon dioxide emissions from agricultural sector was considered as dependent variable. For this purpose, Vector Auto Regressive (VAR) method and annual data from 1981 to 2013 were used. The results of Johansen- Juselius cointegration test showed that there is a long-run relationship between the studied variables. Vector error correction model results showed that in the short-run, financial development index had a significant effect on carbon dioxide emissions and based on the findings of study, increase of energy consumption, financial development and the agricultural sector growth have increased carbon dioxide emissions and technology progress has reduced emissions of this gas in the agricultural sector. Therefore, if economic growth and financial development will lead to savings in energy consumption, emissions of this gas will be reduced. So, change in policy toward financial development with environmental considerations and increasing of energy productivity in agricultural sector is suggested.