Clean Energy Investments Research Articles

Achieving zero emission targets: The influence of green bonds on clean energy investment and environmental quality

The effectiveness of green finance in driving clean energy and environmental sustainability in the current era is receiving attention. Therefore, this study proposes an empirical framework highlighting the effects of green bonds (GB) on clean energy investment (CEI), clean energy investment efficiency (CEE) and environmental sustainability of 29 green bond issuing countries between 2014 and 2022. Using system and difference GMM approaches, this study finds that (i) green bond issuance drives clean energy investment. (ii) Green bonds sufficiently enhance the selected countries' environmental quality. These results supplement the promotion of green bonds in increasing the transfer of funds towards renewable energy projects by reducing reliance on fossil fuels. (iii) Using Driscoll & Kraay, Fully Modified-OLS, and changing the dependent variable, this study further supported the idea that green bonds effectively promote the CEE and environmental sustainability of the chosen countries. (iv) Similarly, this study conducted income heterogeneity, showing that green bonds improve high- and middle-income countries' CEI and environmental quality. (v) Finally, the results indicate that resource consumption escalates CO2 emissions by declining the CEI. Technological innovations increase CEI, whereas they do not mitigate CO2 emissions directly, hinting at the requirement for a comprehensive approach. Therefore, inclusive policies on green bond frameworks, robust incentives, and rigorous environmental criteria should be implemented to attract investment in clean energy development and ensure the environmental sustainability of the selected countries.

Do dirty and clean energy investments react to infectious disease-induced uncertainty?

Following the outbreak of novel coronavirus, numerous studies have assessed the effect on global financial markets. However, investigations into whether, and to what extent, dirty and clean energy asset classes are sensitive to contagious diseases are rare. This study aims to fill this gap in the literature. We measured the effects of contagious viruses using the recently introduced infectious disease-related uncertainty index (EMVID). Our data include the iShares Global Energy ETF and clean energy stock indices from leading economies such as the United States, the European Union, Japan, and China. Employing the GARCH-MIDAS model, we find that the uncertainty associated with infectious diseases has a significant positive (negative) effect on the realized volatility (RV) of dirty (green) assets. This finding is novel given that it indicates the potential for “green recovery” in the post-pandemic era. Our findings further document that EMVID has significant predictive content for the volatility of these assets and that inserting the EMVID index into the GARCH-MIDAS process produces better volatility predictions than other uncertainty measures, including the crude oil volatility (OVX), geopolitical risk (GPR), and economic policy uncertainty (EPU) indices. Hence, the EMVID provides additional information not contained in the OVX, GPR, or EPU during the pandemic period. Our findings will be useful for energy market participants to make appropriate asset allocation decisions during pandemics.

Clean energy market connectedness and investment strategies: New evidence from DCC-GARCH R[formula omitted] decomposed connectedness measures

In this study, we investigate the return propagation mechanism across four clean energy indices, namely, the NASDAQ OMX Green Economy Index, NASDAQ OMX Solar Energy Index, NASDAQ OMX Wind Energy Index, and NASDAQ OMX Geothermal Energy Index ranging from December 21st, 2010 until June 2nd, 2023 by using a novel DCC-GARCH-based R2 decomposed connectedness approach. This framework allows us to efficiently decompose dynamic conditional R2 goodness-of-fit measures into its decomposed components. Furthermore, we introduce the concept of minimum R2 decomposed connectedness portfolios and multivariate hedging portfolios. We find that the dynamic total connectedness is heterogeneous over time and economic-event dependent. In addition, the empirical results highlight that the NASDAQ OMX Green Economy Index is a net transmitter of shocks while all others are net receivers of shocks. Finally, we find that our proposed portfolio technique outperforms the NASDAQ OMX Green Economy Index as well as all alternative multivariate portfolio techniques regarding the hedging effectiveness score and the Sharpe ratio.

One-size-fits-all? Top-down U.S. approach to equitable decarbonization does not fully address state and community-scale perspectives

The U.S. government has made addressing energy equity a key objective of its decarbonization efforts. While energy equity has been studied for decades, equity research in the U.S. has only very recently focused on impacts specific to decarbonization. To guide the implementation of new federal funding for clean energy investments in disadvantaged communities, federal agencies are relying on national-scale socioeconomic and demographic tools to define disadvantaged communities and energy equity metrics. Through an analysis of U.S.-oriented energy equity literature and recently developed tools and frameworks for decarbonization, this paper provides the first comparison of U.S. national versus subnational perspectives on defining disadvantaged communities, their energy equity concerns, and relevant metrics in the context of decarbonization. We show that the U.S. top-down approach to an energy equity framework for decarbonization, while necessary for large-scale policymaking, does not identify all disadvantaged communities nor the diversity and complexity of their concerns and is insufficient to ensure equitable decarbonization.

Energy use, energy access, and oil price fluctuations as new determinants of environmental quality in APEC countries

Energy security has moved to the forefront of international policy agendas and boosted efforts to deploy clean energy technologies. In the past few years, clean energy investment has accelerated at a faster rate than investment in fossil fuels, contributing to the emergence of peak oil demand. This study examines the impact of energy use, energy access, and oil price fluctuations on environmental quality in APEC countries between 1991 and 2020 using shadow economies and agricultural lands as moderating variables. The results of the Arellano-bond dynamic panel data estimation show that energy use, energy access, agricultural land, and a shady economy are positively related to CO2 emissions, while oil price fluctuations are negatively associated with CO2 emissions in APEC nations. There is a positive correlation between energy use and carbon dioxide emissions among APEC nations. As energy use increases, CO2 emissions increase as well. APEC nations have a positive relationship between energy access and carbon dioxide emissions. Policymakers in APEC countries must understand the implications of rising energy consumption and CO2 emissions. To mitigate negative environmental consequences, develop sustainable energy sources, and promote economic growth, energy efficiency measures can help to minimize energy consumption and reduce CO2 emissions. APEC countries are encouraged to develop carbon pricing mechanisms to encourage companies to reduce greenhouse gas emissions through cap and trade systems or carbon taxes. The implementation of carbon pricing mechanisms encourages businesses to switch to cleaner, renewable energy sources as a result of putting a price on carbon emissions.

Left Behind: Funding Climate Action in the Global South

Global clean energy transition envisions zero greenhouse gas emissions by 2050, as set by the United Nations. Consequentially, developed economies have made giant strides in reducing greenhouse gas emissions and achieving full decarbonization. However, the opposite remains true in the Global South, lagging in financing its climate action. Despite being disproportionately impacted by climate change, financial efforts by developed economies and the Global South have failed in placing the latter’s countries at par with clean energy investments of developed countries. Absent adequate financing of climate action in the Global South, the net zero goal will be nothing but a mirage. This Article contends that financial incapacity to finance climate change has left the Global South behind in the global energy transition movement and, if left unchecked, will sabotage global energy transition efforts. Using Africa as a case study, this Article explores the need to develop realistic financing options for global energy transition in the region. This Article recognizes that financing climate change is expensive and much more strenuous on African economies that barely have the fiscal infrastructure to finance the transition. It unpacks the extant climate financing avenues and the inherent challenges in attracting climate finance in Africa and argues for improvements.

Analyzing Crisis Dynamics: How metal-energy Markets influence green electricity investments

The world continues to face major economic challenges due to crises that have a considerable impact on energy consumption. Since the global energy crisis, energy commodity costs have risen, and economic slowdowns in various regions continue to influence electricity market trends. Clean energy markets, propelled by the growing interest of economic entities and investors, are now interconnected with several commodity markets. In this context, energy metals play a crucial role in influencing the dynamics of the clean energy and particularly electricity markets. This study takes a close look at the complex interconnections between clean energy indices and the metals market, focusing on volatility dynamics. Drawing on advanced methodologies, including the Diebold and Yilmaz method, we unveil the complex relationships that link these markets. Our results reveal distinct patterns and interactions, highlighting the nuanced nature of the connection between clean energy indices and metal prices. The insights revealed have significant implications for policymakers and investors seeking to align their strategies with sustainable energy transitions and ensure financial stability. By enhancing our understanding of the interdependencies between clean energy indices and metals markets, this research provides valuable guidance for navigating the changing clean energy investment landscape.

Impact of financial markets on clean energy investment: A comparative analysis of the United States and Nigeria

This comparative analysis explores the impact of financial markets on clean energy investment in two distinct contexts: the United States and Nigeria. As the world increasingly seeks sustainable energy solutions to combat climate change, understanding the dynamics of financial markets and their influence on clean energy investment becomes crucial. Through a comparative lens, this study examines the differences and similarities in the financial landscapes of these two countries and evaluates how these factors shape investment patterns in clean energy. The United States represents a developed economy with well-established financial markets and robust investment infrastructure, while Nigeria serves as a case study of an emerging market grappling with developmental challenges and evolving financial systems. By analyzing data on investment flows, regulatory frameworks, and market conditions, this study aims to provide insights into the role of financial markets in driving or hindering clean energy investment. Factors such as access to capital, government policies, risk perception, and investor preferences will be examined to understand their impact on investment decisions in the clean energy sector. Additionally, the study will explore the role of international financing mechanisms and the influence of global trends on clean energy investment in both countries. By comparing the experiences of the United States and Nigeria, this research seeks to identify best practices and lessons learned that can inform policies aimed at promoting clean energy investment in diverse economic contexts. Ultimately, the findings of this study aim to contribute to the development of strategies that enhance the role of financial markets in accelerating the transition towards a sustainable energy future, while addressing the unique challenges and opportunities faced by different countries in this endeavor.

National disparities in residential energy tax credits in the United States

The Inflation Reduction Act (IRA) promises to deliver $270 billion in tax incentives starting in 2023, expanding on the existing $18 billion in federal income tax credits for clean energy investments. Despite the continued investment in clean energy tax credits, not all communities have historically benefited equally from these programs. This work investigates the presence of disparities in the residential energy tax credit (RETC) program, which was recently expanded under the IRA. We use quantile regression models to explore disparities in the participation in and average value received from the RETCs across demographics. Because tax credit programs result in second-tier benefits such as job creation, we compare the relationship between RETC participation and the presence of clean jobs across demographics. We find that rural communities, renter-occupied communities, and communities of color are disproportionately participating less in the RETC. However, we observe that when renter-occupied or communities of color do participate, they see higher average value comparatively as well as more clean jobs associated per tax return with the RETC. While disparities across demographic groups persist in participation in the RETC, these findings suggest that renter-occupied or communities of color see more benefits when they do participate.

BEYOND GROWTH: SHIFTING THE PARADIGM BY EMBRACING MATURITY

For many years in the twentieth century, economic growth was synonymous with progress. In the twenty-first century, growth still holds a central place in the concept of development in Western societies, despite being identified as a fetish or an ideology, and its limits having been recognised for decades. Most recently, new debates on the need to develop a paradigm not exclusively based on growth have emerged again in Europe. Scholars have been reflecting on the idea of “beyond growth”, proposing models for new green growth, advocating for degrowth, or suggesting a radical evolution of growth. Next to these perspectives, this contribution suggests that the concept of maturity could successfully shape a new narrative on “beyond growth”. To better describe the idea of maturity, which implies that development is possible without necessarily entailing expansion, two cases are analysed. At the macro level, the U.S. Inflation Reduction Act demonstrates that a new economic approach is possible, featuring bold investments in clean energy. However, the paradigm shift toward a system that does not revolve around growth is not yet in sight in this case. Conversely, at the micro level, the analysed case of some Italian winemakers illustrates what it truly means to value maturity in business activities. Beyond these two cases, further opportunities for alternative development are explored, focusing on digital transformation. It is framed as an opportunity for increased life chances while acknowledging that the same old capitalist logic remains deeply entrenched in it and may jeopardise the opportunities.

Examining the quantile cross-coherence between fossil energy and clean energy: Is the dependence structure changing with the COVID-19 outbreak?

The advent of COVID-19 has markedly affected financial and energy markets. Clean energy positions itself as a feasible substitute for fossil fuels, and the crisis has altered the interdependence of these two counterpart markets. This study uses quantile cross-spectral analysis to investigate the dependence structure features of the fossil and clean energy markets, pre- and post-COVID-19 outbreak, under various market conditions and across different investment horizons. Empirical results suggest an anomalous intensification or inversion in the interaction between fossil and clean energy under extreme market conditions post-COVID-19 outbreak, manifesting either an extraordinarily high or low dependency. Additionally, the asset dependence structure exhibits increased heterogeneity across investment horizons after the COVID-19 outbreak, with short-term structures demonstrating higher volatility, while medium- and long-term structures show similarity. Finally, by generating a dynamic energy portfolio, this paper measures the investment allocation weights of each asset before and after the emergence of COVID-19. Findings indicate an increased need for investment in natural gas, crude oil, and clean energy post-COVID-19 outbreak, suggesting a reduction in coal investment. The analyses aim to assist energy investors in enhancing their economic decision-making processes and refining their portfolio management strategies.

IFRS, financial development and pollutant emissions: an empirical analysis of developed and developing countries

PurposeThe purpose of this study is to examine the relationship between pollutant emissions, financial development and IFRS in developed and developing countries between 1998 and 2022.Design/methodology/approachData were obtained from World Development Indicators and World Governance Indicators of the World Bank.FindingsUsing FGLS and GMM estimators, the results provide evidence that financial development has a significant positive impact on a variety of pollutant emissions. However, this positive impact is moderated by IFRS for the overall sample and country income groups.Practical implicationsGovernments and regulatory organizations should support companies’ investments in clean energy and technologies to slow down environmental degradation. Tax credits and subsidies may be helpful to achieve this goal. Also, governments may encourage companies to cooperate with universities and research institutions to develop environment-friendly production and distribution methods to reduce pollution. Although stakeholders may obtain information about environmental issues in financial statements that are prepared in accordance with IFRS, there is a need for standardization of their contents.Social implicationsGreenhouse gases are major contributors to climate change and global warming. In addition to private costs borne by producers, the production and consumption of products have social costs arising from pollution that affects air, water, and soil. Pollution adversely affects people's physiological and psychological health, which decreases labor productivity, thereby leading to a decrease in economic growth. Originality/valueAccording to the author’s knowledge, this is the first study that examines the impact of IFRS on the relationship between financial development and pollutant emissions.

Asymmetric impacts of coal prices, fintech, and financial stress on clean energy stocks

The emergence of fintech has revolutionized financial systems, alleviating financial stress through innovative solutions and diversification. This shift towards clean energy stocks has reduced demand for coal, impacting coal prices significantly and highlighting the pressing need to preserve mineral resources for sustainable, cleaner energy alternatives. Therefore, the study examines the interconnectedness between coal price, fintech, financial stress, and green energy stock using quantile-based regression. The findings reveal that the impact of coal price, fintech, and financial stress on the clean energy stock is heterogeneous across all levels of quantiles. Specifically, the findings indicate that variations in the coal price positively influence the clean energy stock index, yet this association displays asymmetry across quantiles. Fluctuations in the fintech index contribute to the susceptibility of renewable energy stock prices. The financial stress index exhibits a consistently adverse influence on clean energy stock across quantiles ranging from lower to higher orders. The study findings would guide stock market investors, ecological activists, and policymakers at administrative levels aiming to promote clean energy investment while controlling for the adverse outcomes from financial stress.

Nexus between financial development, foreign direct investment, and renewable energy consumption: Evidence from SSA

This study examines the nexus between urbanization (UR), gross capital formation (GCF), trade openness (TO), and renewable energy consumption (REC) to understand their interplay and implications for renewable energy adoption. Analyzing the data reveals a negative correlation between UR, GCF, TO, and REC, highlighting challenges in promoting renewable energy amidst urbanization, capital formation, and global trade integration. Policy interventions are crucial to address barriers hindering renewable energy uptake. Recommendations include incentivizing foreign direct investment, enhancing technology transfer, incentivizing clean energy investments, and promoting financial literacy. Integrated urban planning and alignment of capital formation policies with renewable energy goals are essential strategies to accelerate renewable energy adoption. This study offers valuable insights for policymakers and stakeholders seeking to promote renewable energy development and sustainability.

Evaluation of Energy Efficiency and Analysis of Influencing Factors of Company CW’s Manufacturing Workshops

In this work, the Slacks-Based Measure (SBM) model within Data Envelopment Analysis was employed toestablish a set of indicators for evaluating the energy efficiency of manufacturing workshops. The energy efficiency of 12 Company CW’s manufacturing workshops from 2016 to 2022 was assessed. The findings indicated that aside from a few workshops operating at the production frontier, the rest exhibit significant fluctuations in energy efficiency and generally low energy efficiency. Subsequently, a combined GRA-Tobit analysis model was introduced to identify factors influencing the energy efficiency of Company CW’s manufacturing workshops. Regression analysis revealed that technological investments, employee quality, workshop production scale, investment in clean energy, and the level of pollution control all significantly impact the energy efficiency of Company CW’s manufacturing workshops. By evaluating the energy efficiency of Company CW’s manufacturing workshops and studying their influencing factors, this research aids companymanagers in understanding the energy efficiency of the manufacturing process. It optimizes the combination of various production elements, thereby offering effective guidance for improving the energy efficiency issues of the company’s manufacturing workshops, which can contribute to enhancing the corporation’s overall energy efficiency.

Do green investments improve portfolio diversification? Evidence from mean conditional value-at-risk optimization

This study investigates how green investment assets improve optimal portfolio diversification in terms of tail downside risk. We use the wavelet conditional value-at-risk ratio to explore the benefits of adding green assets to conventional portfolios. We quantify risk based on the contagion between conventional stock market indices and green environmental assets, including a sustainability index, clean energy, and green bonds. Our findings emphasize the high variance between conventional stock pairs, providing evidence of contagion effects before and during the COVID-19 pandemic. We show that including clean energy and green bond indices in conventional portfolios reduces the extreme risk of portfolios. In addition, we find that the diversification benefits of clean energy, green bonds, and safe-haven investments apply especially in the short term during the pandemic. Finally, we show that the considered portfolios could not decrease long-term risk during the COVID-19 crisis because of the systematic risk spread. Our portfolio optimization design supports the superiority of clean energy and green bonds in portfolio diversification over the sustainability index. These insights can be used by portfolio managers to inform diversification in different investment horizons.

Are Natural Resource Rents and Renewable Energy Consumption Solutions for Environmental Degradation? Fresh Insights from a Modified Ecological Footprint Model

A comprehensive approach addressing the key factors exacerbating pressure on the environment is required to minimize the damages caused by global warming and environmental destruction. For this purpose, the present study investigates the effects of renewable energy consumption (REC) and natural resource rents (NRRs) on environmental degradation within the scope of the environmental Kuznets curve (EKC) hypothesis for ASEAN-5 countries. Differing from most previous studies, this research represents environmental degradation by using the ecological footprint pressure index, which considers both the supply and demand aspects of the environment. The present study covers the period between 1990 and 2018. This study employs the Method of Moments Quantile Regression (MMQR), an advanced panel technique that yields reliable results on the outlier issue, endogeneity, and non-normal distribution. The MMQR results confirm the EKC hypothesis, assuming the presence of an inverted U-shaped relationship between economic growth and environmental degradation. Moreover, the results reveal that REC and NRRs reduce environmental degradation in all quantiles. Given these results, policymakers in the ASEAN-5 countries are recommended to utilize productivity gains from natural resource rents for investment in clean energy and to shift their energy consumption policies towards renewable energy technologies and research.

Assessing the impact of geopolitical, economic, and institutional factors on China's environmental management in the Russian-Ukraine conflicting era

In contemporary times, geopolitical risk, and natural resources prices are susceptible due to the Russian-Ukraine conflict. In the meantime, emerging economies are struggling to explore the factors that could reduce ecological challenges and enhance environmental management. This research aims to analyze several economic, environmental, political, and institutional variables to ascertain their influence on greenhouse gas emissions in China. Covering the latest period from 1990 to 2022, various time series tests, including normality, stationarity, and cointegration tests. The results confirm that the variables studied have a stable pattern over time and are connected in the long run. The non-normal distribution of variables leads to opt novel moment quantile regression, where the results are tested for robustness via parametric approaches. The empirical results asserted that economic growth, natural resource prices, and trade significantly enhance ecological challenges (emissions). However, globalization, geopolitical risk, and institutional quality significantly reduce such environmental challenges. The results are robust, and both unidirectional and bidirectional causal associations confirm the importance of these variables in environmental management. Based on the results, this study recommends engagement in environmentally-friendly trading, investment in clean and green energy, and strengthening institutional quality for the region's environmental recovery.

The impact of investor attention on green bond returns: How do market uncertainties and investment performances of clean energy and oil and gas markets affect the connectedness between investor attention and green bond?

This paper empirically investigates the spillover between investor attention and green bond returns by utilizing the connectedness approach. We will examine the impact of uncertainty in the stock, bond, and energy markets, as well as the success of clean energy, oil, and gas investments, on the relationship between green bonds and investor attention. We find that there are positive but small spillovers between investor attention and green bond returns. Besides, the connectedness between investor attention and green bond market performance is stronger in the short run than in the long run. Further, there is a time-varying feedback effect between green bond returns and investor attention. The connectedness approach also implies that the effect of investor attention on green bond returns is greatest in the COVID-19 period. This impact decreased throughout the war era. It is crucial to analyze the behaviour of green bonds in both typical and exceptional market situations. Making a general assessment may lead to insufficient information about how green bonds behave in extreme market conditions. Additionally, in instances of highly volatile market conditions, investor attention can serve as a valuable instrument for predicting the green bond market performance.

From resource curse to green renaissance: Analyzing the dynamics of natural resource abundance on China's green total factor productivity during business cycles

The current body of research fails to thoroughly examine how the abundance of natural resources affects China's green total factor productivity during different phases of economic cycles. The interconnection between the natural resource abundance and the green total factor productivity in China, the second-biggest economy worldwide, offers valuable insights into the sustainable management of resources amidst fast economic expansion. This research aims to analyze how the abundance of natural resources influences China's total green factor productivity during different phases of business cycles. A fully modified and dynamic ordinary least squares methodology uses cyclical data from 1990Q1 to 2019Q4. The findings indicate that during boom periods, a surge in natural resource abundance, gross domestic product, financial development, foreign direct investment and renewable energy consumption are correlated with heightened levels of green total factor productivity, suggesting that resource-dependent industries experience positive effects due to improved availability and quality of resources. Conversely, the findings infer that a decline in these variables is observed during the recession period, leading to a decrease in green total factor productivity. The results indicate a pro-cyclical relationship between natural resource abundance, gross domestic product, financial development, foreign direct investment and renewable energy consumption during periods of expansion and contraction. Based on the research findings, the study suggests that legislators should emphasize measures that foster investments in clean energy, ethical resource management practices, and financial development during economic booms. In contrast, during economic contractions, attempts should be concentrated on sustaining or boosting investments in green technology, encouraging feasible resource utilization, and enacting policies that foster foreign direct investment.