The nexus of Green finance and renewable energy on CO2 emissions

Abstract

As greener strategies become the top priority of all nations, their contributions toward decarbonized economies arise as an important topic. The present study attempts to weigh the effect of such strategies. We investigate this relationship using panel regressions and applying many tests based on data gathered from 2010 to 2019. Our findings underscore the positive impact of adopting green initiatives on mitigating environmental pollution. Specifically, we demonstrate that renewable energy consumption serves as a vital substitute for traditional energy sources in G7 nations, offering significant opportunities for private sector involvement in sustainable energy ventures. However, green finance initiatives exhibit positive outcomes while certain aspects of economic development exert detrimental consequences on environmental conditions. The current study is useful for environmental protection agencies, organizations, analysts, policymakers, and the private sector, as the role of green finance and energy efficiency is highly manifested. By channeling and reallocating appropriate funds to green projects, including those led by private enterprises, G7 countries can proactively address environmental degradation and align with the objectives outlined in the Paris Agreement. Keywords CO₂ Emissions, Financial Development, Foreign Direct Investments, GDP, Green Finance, Renewable Energy