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The present study aims to investigate the relationship between economic growth, energy intensity and CO₂ emissions by incorporating financial development in CO₂ emissions function using Portuguese annual data over the period of 1971–2011. The unit root problem of variables is examined by applying Zivot-Andrews unit root test and the ARDL bounds testing approach is for long run relationship. The direction of causal relationship between the series is examined by the VECM Granger causality approach and robustness of causality analysis is tested by innovative accounting approach (IAA).

Our empirical evidence confirmed that the variables are cointegrated for long run relationship. The results exposed that economic growth and energy intensity increase CO₂ emissions, while financial development condenses it. The VECM Granger causality analysis showed the feedback effect between energy intensity and …