THE ROLE OF GREEN FINANCE ON RENEWABLE ENERGY, CO2 EMISSIONS AND ECONOMIC GROWTH: EVIDENCE FROM THE EUROPEAN UNION

Abstract

Green finance is the main tool used to mitigate the effects of climate change. It is a financial instrument used to stimulate investments and projects within the green energy sector, increase energy efficiency and offset carbon emissions. The objective of this study is to analyze the effects that green finance has on renewable energy, carbon emissions and economic growth by looking at the European Union during 2000-2020. The analysis uses a panel data approach and conducts diagnostic tests in order to assess the presence of heterogenous slopes, cross-section dependence, and co-integration tests in order to examine the relationship between variables. Due to the skewness and variability, the analysis will be conducted using the method of moments quantile regression. The results of the analysis show that there is an unsignificant negative relationship between green finance and economic growth, a positive relationship between green finance and renewable energy and CO2 emissions within the European Union countries.