Assessing the load capacity curve hypothesis considering the green energy transition, banking sector expansion, and import price of crude oil in the United States

Abstract

The existing literature consists of various studies that have addressed the interrelationship between banking expansion and carbon emissions but failed to consider supply‐side ecological issues. Keeping this in view, the research aims to assess the impact of green energy transition, banking sector expansion, and import price of crude oil on the “load capacity factor (LCF)” in the United States from 1990 to 2021. The “LCF” has emerged as a novel ecological proxy to date that includes both “biocapacity and ecological footprint.” Using the “bootstrap autoregressive distributed lag” model, the research found that the consumption of renewable energy can enhance the ecological quality of the United States. The results verified the acceptance of the “load capacity curve” hypothesis. Moreover, it demonstrates that banking development promotes environmental quality. Specifically, a 1% improvement in the banking industry leads to a 0.93% increase in the LCF in the short term, as well as a 1.28% increase in the long run. Furthermore, the increase in crude oil import prices has a positive impact on the LCF and eventually promotes environmental sustainability. To be precise, a 1% rise in the price of imported crude oil results in a 0.35% increase in the long‐term LCF level. These results were backed by the findings of several robustness tests. The study, lastly, recommends that the banking sector and government policymakers should use banking growth in promoting green energy to attain their target of zero carbon emissions by 2050.