Financial Development, Green Finance, And Carbon Emissions: Renewable Energy as a Mediating Mechanism In A Green Economy Framework

Abstract

In the past five years, there has been an increasing interest in green financing as many companies, nations, and organizations view the green economy as essential to achieving the Paris Agreement objective of 1.5°C global warming and below 2°C. Today, however, the production of non-renewable energy is a CO₂ demanding process, contributing about 2% of world CO₂ emissions. We cannot advance toward a green economy by maintaining processes that produce greenhouse gases. Energy production must be done as cheaply and with the least amount of greenhouse gas emissions feasible, most likely necessitating the usage of renewable energy sources. The study about modeling aims to comprehend how renewable energy use mediates the effects of foreign direct investment, green finance, economic growth, natural resources rent, international trade, and urbanization on environmental degradation while examining the moderation of financial development by employing a two-stage moderated mediation model in the particular case of 79 nations. The selection of the sample period and countries is based on the availability of annual data covering the twenty-one years 1999-2019. We obtained the necessary data for our variables from reputable sources, namely the World Bank, (2022) and the OECD, (2022). With the insights gained from our study, government agencies, institutions, policymakers, and other organizations could implement more sensible, suitable, and effective measures to promote environmental safety. The findings of the study state that green financing have positive impact on reducing pollution. Hence, modernization increases CO₂ emissions, which cause a threat to environmental quality. The researchers suggest that there must be a standardized measure of production, distribution, and consumption. There is a need for green economy measures, and the government must initiate steps towards green-friendly products/ projects. Those are less harmful to the economy.