Green Finance, Climate Policy Uncertainty, and Ecological Carrying Capacity Dynamics in G20 Economies: Evidence from Load Capacity Factor Panel Analysis

Abstract

Carbon-based indicators do not show whether ecosystems can generate sufficient biocapacity to fulfil human needs, and the G20 economies account for a large portion of the global ecological burden. This study analyses the load capacity factor (LCF) of 19 G20 economies between 2000 and 2022, measured as biocapacity divided by the ecological footprint. It examines the long-run association between green bond issuance and ecological carrying capacity, as well as the moderating role of climate policy uncertainty (CPU) in this association. The analysis includes Pesaran cross-sectional dependence and slope heterogeneity tests, Cross-sectionally Augmented Im, Pesaran, and Shin (CIPS) and Cross-sectionally Augmented Dickey-Fuller (CADF) unit-root tests, Fourier-Shin cointegration, Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) estimation, Augmented Mean Group (AMG), Common Correlated Effects Mean Group (CCEMG) robustness checks, and Konya bootstrap Granger-causality tests, and conditional marginal-effect analysis for the GB_GDP × CPU interaction. The main CS-ARDL results show a positive long-run association for green bond issuance (β = 0.182, p < 0.01) and a negative association for the CPU (β = −0.011, p < 0.01). The interaction term is negative (β = −0.004, p < 0.05), indicating that the green bond-LCF association weakens as policy uncertainty increases. The conditional marginal effects become statistically indistinguishable from zero near the upper tail of the CPU distribution. The Konya results indicate heterogeneous country-level temporal patterns rather than uniform structural causality. Overall, green finance is associated with a stronger ecological carrying capacity when climate policy settings are stable and institutional conditions support long-term ecological investment.