Navigating a Greener Future: The Role of Geopolitical Risk, Financial Inclusion, and AI Innovation in the BRICS – An Empirical Analysis

Abstract

This study examines the impact of Geopolitical Risk, Financial Inclusion, and AI Innovation on CO₂ emissions in BRICS countries from 2000 to 2019, alongside Renewable Energy Use and Economic Growth. Econometric tests revealed cross-sectional dependence and heterogeneity across the panel, with unit root tests confirming stationarity. A second-generation panel cointegration test established a long-run equilibrium relationship among the variables. Using the Panel Autoregressive Distributed Lag (ARDL) model, the analysis found that GDP and Geopolitical Risk significantly increase CO₂ emissions in both the short and long run. In contrast, AI Innovation, Financial Inclusion, and Renewable Energy Use substantially reduce emissions across time horizons. Robustness checks employing Driscoll-Kraay Standard Errors, Augmented Mean Group, and Common Correlated Effects Mean Group methods confirmed the consistency of the findings. The study concludes that promoting AI innovation, enhancing financial inclusion, and encouraging renewable energy adoption are essential strategies for reducing CO₂ emissions in the BRICS countries, especially in the context of rising geopolitical uncertainties.