Evaluating policy-driven capital for renewable energy investments in the presence of cross-sectional dependence: perspectives from financial institutions and markets.

Abstract

Access to financing is crucial for renewable energy projects due to their high initial capital costs and long payback times. In this regard, well-performing financial institutions and markets can provide the necessary capital for investments in renewable energy sources. This study emphasizes the impact of financial institutions and markets on renewable energy investment using data from various regions (Asia, Africa, Europe, and America). The CS-ARDL model is employed for analysis during 1998-2021. The findings of the CS-ARDL highlight that financial institutions, financial markets, greenhouse gas emissions, and GDP help promote investments in renewable energy in the long run for all samples, including global, Asian, American, African, and European. However, the estimates of ICT and Trade have insignificant effects on investments in renewable energy. In the short run, most of the factors do not show any significant effect on renewable energy investments. Therefore, policymakers should try to increase the role of financial institutions and markets in promoting renewable by inducing them to ease their policies for grant of loans to invest in renewable energy sources.