Is there any recovery power for economic growth from green finance? Evidence from OECD member countries

Abstract

This paper investigates the dynamic interactions between green finance, economic growth, and green energy consumption for the Organization of Economic Cooperation and Development (OECD) members. The econometric analysis is conducted on annual data gathered throughout 2010–2020 using different estimation techniques of the Vector Autoregressive model, causality, and co-integration approaches. The main results confirmed a positive bi-directional relationship between GDP and green energy consumption. In addition, there is a two-way relationship between the volume of green bond issuance and the use of green energy in OECD countries. The recommended practical policy recommendations are establishing a unified green bonds market among OECD member states, prioritizing green projects to support the issued green bonds, improving the financial system, and financing rural electrification and electric vehicle transition by green bonds.

The Role of Green Finance in Fostering the Sustainability of the Economy and Renewable Energy Supply: Recent Issues and Challenges

“…With sufficient funding, renewable energy projects can be implemented on a larger scale and at a faster pace, contributing to the global transition to cleaner energy sources. A number of research papers support this argument by providing evidence that green bonds significantly foster renewable energy production [19,22,[72][73][74]. In particular, green bonds increase wind and hydro-energy consumption in OECD countries [62].…”

“…A mutual connection between the volume of green bond and the usage of renewable energy can be observed in OECD countries. The previous research demonstrated that the existence and development of green bonds as financial instruments and well-developed regulatory guidelines on the field perform an important and affirmative role in encouraging investment in renewable energy [22,75]. Nevertheless, oil price volatility and geopolitical risk have a contrary effect.…”

“…The development of capital markets and bond markets affects the use of renewable energy [20,21]. However, in general, in recent years, green finance studies have mostly been conducted in developing countries; only a few thorough studies on European countries can be found [19,[22][23][24][25].…”

Can increasing technological complexity help strengthen regional economic resilience?

“…In the context of global warming and environmental degradation, how to achieve green economic recovery has also attracted wide attention. Among them, many studies explore effective paths for green economic recovery from the perspective of green transformation of financial industry, and find that green finance can increase investment in clean energy development projects (Abbas et al 2020 ; Taghizadeh-Hesary 2022 ; Huang et al 2022 ), reduce energy intensity, and improve energy efficiency (Huang et al 2022 ; Guo et al 2022 ) and energy poverty alleviation (Zhao et al 2022 ) to achieve eco-friendly growth and promote green economic recovery.…”