Sustainable Energy Sources and Financial Development Nexus—Perspective of European Union Countries in 2013–2021

Abstract

The focus of this paper is the relationship between sustainable energy sources and financial development. The main research hypothesis assumes a positive link between these areas, with inevitable differences across countries and business sectors. The following research questions were asked: Is the impact of financial development on sustainable energy resources the same in different EU countries advanced in green transition processes? How is transition towards renewable energy sources progressing in different economic sectors? Does financial development influence sectoral transition in particular countries? This study uses the TOPSIS method and 25 variables for EU countries from 2013 to 2021. Key findings reveal that the link between sustainable energy sources and financial development varies across EU countries, country size affects energy autonomy, and the transition also differs by business sector. Surprisingly, higher financial development correlates with less progress in sustainable energy initiatives. The results of our research may be useful for government decision-makers in the process of designing and controlling the country’s transition to sustainable energy. The original contribution of the study is expressed in its the diagnosis of the relationship between financial development and sustainable energy sources, while most studies have focused on the relationship between the energy market and financial development.