Role of green finance in improving energy efficiency and renewable energy development

Deploying green energy is, directly and indirectly, related to energy- and environment-related sustainable development goals (SDGs). This study uses the stochastic impact by regression on the population, affluence, and technology (STIRPAT) model to examine the relationship between CO2 emissions, energy efficiency, green energy index (GEI), and green finance in the top ten economies that support green finance. The results show that green bonds are a suitable method to promote green energy projects and reduce CO2 emissions significantly. At the same time, there is no causal linkage between these variables in the short term. Therefore, to achieve sustainable economic growth for environmental issues, governments should implement supportive policies with a long-term approach to boost private participation in the investment of green energy projects. This policy may be applicable during and in the post the COVID-19 era when green projects have more difficulties accessing finance.

Automated summary

This study examines the relationship between CO2 emissions, energy efficiency, green energy index, and green finance using the STIRPAT model. The results indicate that green bonds are an effective method to promote green energy projects and reduce CO2 emissions.