This thesis intends to investigate the link between financial development and CO2 emission for selected South Asian countries. Furthermore, the study also investigates the validity of environmental Kuznets curve (EKC) in case of carbon dioxide emission. This study has used the Panel Fixed Effect Least Square as well as Random Effect technique over the Period of 1974 to 2013. The study results show that financial development has positive impact on CO2 emission in selected South Asian countries. Result also shows that that trade openness has negative impact on co2 emission while energy use and GDP per capita have positive impact on CO2 emission in selected countries. As far, EKC hypothesis is concerned; the result confirms the existence of (EKC) hypothesis in these selected South Asian countries. Interestingly, FDI has insignificant impact, so there is no role of FDI on CO2 emission in selected south Asian countries. On the other hand, estimation results based on random effect model show almost the same results that we get with fixed effect model. For example, just like the empirical results based on fixed effect model, random effect model too indicate that financial development has significantly positive impact on co2 emission. In the same manner, energy use and economic growth have positive impact on co2 emission. Finally the results confirm the EKC hypothesis but the coefficient of GDP square is not significant Supervisor: Dr Javed Iqbal