Innovation for renewable energy and energy related greenhouse gases: Evaluating the role of green finance

Abstract

Environmental degradation is one of the many unintended consequences of industrialization, which has resulted in misery for humans, and biodiversity around the world. These environmental concerns require consideration in order to gain a better understanding of how to design policy around climate change. In this regard, a number of deals have been reached with the objective of reducing pollutants in the environment so as to keep an average temperature that below 2 degrees Celsius. In order to effectively reduce greenhouse gas emissions, nations all over the world have been putting more of their attention on investments in R&D for renewable energy, often known as green financing. This study explores the influence of green finance in the presence of GDP, human capital, and economic risk on GHG emissions in G7 countries for the period of 1990–2020. We find that green finance and economic risk abates GHG emission intensity. It is interesting that the impact of green finance is stronger for countries with high emissions level and lower for low emitter countries. Human capital and GDP increase GHG emissions. The results of the present study have important consequence for G7 nations because majority of these countries have been facing high oil demand. Policies to enhance green financing during the period of high energy demand are vital. It is imperative that policies be put in place to maintain the development in green financing.