Towards low carbon economy: Role of green finance in climate change mitigation

Abstract

In leveraging carbon capture, carbon taxation, technological innovations, and energy transition to tackle environmental degradation in pursuit of the COP-28 vision, there is also a need to consider the viability of green financing to facilitate climate mitigation and achieve a low-carbon economy. The present study investigates the pivotal role green finance can play in mitigating the effects of climate change. The findings from the LCM OLS, LCM FMOLS, and LCM dynamic ARDL model estimators showed that green financing and energy efficiency have a negative and significant effect on climate mitigation. Although the long-run outcome of the dynamic ARDL regression revealed that they have a negative and insignificant effect on climate mitigation, it goes on to suggest that with proper policies in place to sustain energy efficiency and green financing, climate mitigation will be sustained in the long run. While economic growth and technological innovation have a positive effect on climate mitigation, this is indeed expected because economic growth at the initial stage of industrialization encourages environmental destruction. The recommendations are to increase green financing and the adoption of energy-efficient technologies and fuels.