CLIMATE FINANCE AND GREEN ENERGY TRANSITION

Résumé fourni par la source

The mobilization of climate finance for green energy transition is one of the most important policy challenges of the twenty-first century, but there is a lack of systematic cross-regional evidence on the drivers and effects. This study uses a balanced longitudinal panel dataset from 2015 to 2024 for eleven countries in two developing regions: Sub-Saharan Africa (Kenya, Tanzania, Uganda, and South Africa) and South and Southeast Asia. This study examines how climate finance inflows, institutional quality, fossil-fuel subsidy reform, and macroeconomic fundamentals jointly shape renewable energy capacity expansion. Using publicly available data from the World Bank World Development Indicators, the International Renewable Energy Agency (IRENA), the International Energy Agency (IEA), and the OECD Creditor Reporting System (CRS), we employ two-way fixed-effects (TWFE) panel models with Driscoll-Kraay standard errors to address cross-sectional dependence and heteroscedasticity, instrumental variable (IV) and difference-in-differences (DiD) specifications to account for endogeneity, and estimate the relationship between climate finance inflows, institutional quality, fossil-fuel subsidy reform, and macroeconomic fundamentals for renewable energy capacity expansion across 2015 to 2024. The results show that a 10 percent increase in climate-related ODA leads to a 2.3-percentage-point increase in the share of renewables in total electricity capacity, with South and Southeast Asia benefiting more. We find that institutional quality, proxied by World Governance Indicators, has a positive and statistically significant moderating role, while fossil-fuel subsidies have a statistically significant negative effect on renewable capacity. Normalized by clean energy investment needs, Sub- Saharan African countries have a financing gap about 3.4 times larger, relative to GDP, than their Asian counterparts. This leads to policy implications for the Paris Agreement, and Sustainable Development Goal 7.

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