Assessing financial expansion, foreign direct investment and innovation effects on CO2 emissions in Thailand

The increasing urgency of climate change and the growing pressure to achieve sustainable development have intensified the need to understand the macroeconomic drivers of carbon emissions, particularly in emerging economies. In Thailand, rapid economic growth, expanding financial systems, and rising foreign investment have raised concerns about their environmental consequences. This study examines the nexus between financial development (FD), foreign direct investment (FDI), economic growth (EG), innovation (INNO), and carbon dioxide (CO 2 ) emissions in Thailand over the period 1990–2024, using the autoregressive distributed lag (ARDL) bounds testing approach and Stata-based estimations. The ARDL methodology is employed to capture both long-run equilibrium relationships and short-run dynamic adjustments among the variables, even when integration orders differ. The bounds test confirms the existence of a stable long-run cointegrating relationship. Long-run estimates reveal that EG and FDI significantly increase CO 2 emissions, reflecting dominant scale and production-composition effects. FD is also found to exacerbate emissions, suggesting that credit expansion has historically supported energy-intensive activities. In contrast, INNO reduces CO 2 emissions, highlighting the role of technological progress and efficiency improvements in environmental sustainability. Short-run results indicate a significant negative error-correction term, confirming convergence toward the long-run equilibrium. Diagnostic and stability tests further validate the model's robustness. The findings underscore the importance of green FD, INNO-driven policies, and sustainable FDI strategies in achieving low-carbon growth in Thailand.