Heterogeneous Relationships Between Islamic Finance, Human Development, and Carbon Emissions: Evidence from OIC Countries
DOI:
https://doi.org/10.21580/economica.2026.17.1.29700Keywords:
Carbon Emissions, Human Development Index, Islamic Investment, OIC Countries, Quantile RegressionAbstract
This study investigates the impact of Islamic Investment and the Human Development Index (HDI) on carbon emissions in member countries of the Organization of Islamic Cooperation (OIC) from 2013 to 2023. Islamic Investment is measured by sukuk holdings and Sharia-compliant financing to the industrial sector. The impact of HDI on carbon emissions is tested as an indicator of the quality of human development. This study uses the Quantile Regression and the Fully Modified Ordinary Least Squares (FMOLS) methods to analyze the distributional and long-term relationships of the variables. The results show that sukuk holdings are negatively and significantly related to carbon emissions of member countries, especially those in the low- to medium emission level category. Sharia-compliant financing to the industrial sector is found to be positively and significantly related to carbon emissions, indicating an ineffectiveness in the shift to a green industry. HDI is shown to be negatively and significantly related to carbon emissions at the lower and middle quantiles. Long-run significant impacts of HDI are also shown. Overall, the results show the need for OIC member countries to focus on the use of sustainability-based Islamic financial instruments to help achieve their decarbonization goals and improve the quality of human development.
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