Climate Finance and Renewable Energy Capacities in the EU
Mahmoud Hassan  1@  , Ji-Yong Lee  2@  , Marc Kouzez  3@  
1 : Borddeaux School of Economics
Bordeaux School of Economics
2 : Audencia Business School
Audencia Business School, Nantes
3 : ICN Business School
ICN Business School, ICN Business School

Tripling the world's installed renewable power capacity by 2030 is one of the global pledges at the COP28 UN Climate Change Conference to keep the 1.5°C goal within reach. Green finance (GRF), financial development (FD) and energy taxes (ENTAX) are expected to play a crucial role in achieving this goal. However, little empirical evidence has been provided on this topic at the European Union (EU) level. Therefore, this paper fills this lacuna by estimating the combined effects of these three variables on Installed Clean Energy Capacity (ICEC) in 14 European countries during the 2007-2021 period. Due to non-normal data distribution, the Method of Moment Quantile Regression (MMQR) has been employed. Moreover, the explainable artificial intelligence analysis, causality tests, fixed effects with Driscoll-Kraay standard errors and quantile regression with fixed effects have been used as robustness checks of results. The findings assert that GRF and ENTAX are positively associated with ICEC, whereas FD hinders investment in the ICEC. However, energy taxes are more effective than green finance in promoting ICEC. On the other hand, the positive impact of GRF is higher when countries have a higher level of ICEC. In comparison, the positive effect of ENTAX in stimulating ICEC is higher when countries have a lower level of ICEC. Additionally, FD exhibits a U-shaped influence on ICEC. Based on these results, this research suggests that accelerating energy transition in the EU requires expanding in both green finance and energy taxes. Furthermore, a reform of the current structure of the financial system is needed.


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