Achieving clean energy transitions: How green innovation and financial development shape energy usage

Umer Shahzad

Energy Economics, 2025, vol. 150, issue C

Abstract: Clean energy usage plays a key role in reducing reliance on fossil fuels and mitigating global environmental degradation. This study aims to address environmental challenges by examining the impact of green innovation and financial development on total, clean, and dirty energy usage in 49 high-income countries from 1990 to 2023 by employing the Common Correlated Effects Estimator (CS-ARDL). The findings reveal that green innovation significantly reduces total and dirty energy usage while increasing clean energy usage, underscoring its critical role in promoting sustainable energy transitions. In contrast, financial development alone increases total energy usage, as well as both dirty and clean energy usage. However, the interaction between financial development and green innovation yields favorable outcomes, reducing total and dirty energy usage while enhancing clean energy usage. The interaction of GDP and population growth with financial development is found to increase total and dirty energy usage. Moreover, financial markets encourage clean energy usage, while financial institutions tend to reduce it. Furthermore, financial development, green innovation, population, and GDP exhibit bidirectional causal relationships with total, clean, and dirty energy usage. In addition, Quantile Regression Analysis confirms that green innovation effectively reduces total and dirty energy usage while boosting clean energy usage, especially at higher quantiles. Meanwhile, financial development also decreases total and dirty energy usage in higher quantiles and promotes clean energy usage in the middle quantile. These findings highlight the importance of coordinated policies that combine green innovation with financial development to achieve sustainable energy systems and address global environmental challenges.

Keywords: Financial development; Green innovation; Clean energy usage; Dirty energy usage; Total energy usage; The common correlated effects estimator (CS-ARDL) (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988325006784
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:150:y:2025:i:c:s0140988325006784

DOI: 10.1016/j.eneco.2025.108851

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().