Financing renewable energy development: Insights from 55 countries

Abstract

This research note examines the effects of financial development on the deployment of renewable energy (RE). We apply a two-step system generalized method of moments (GMM) approach to a global sample of 55 countries in 2005–2014. Our results indicate that financial sector development is a significant determinant of RE deployment. This implies that policy makers should pursue policies that facilitate financing for RE firms. The positive effect of financial development on RE appears to be statistically significant for high-income countries but insignificant for low- and middle-income countries. The findings seem to be robust to different measures of financial development. Investing in RE requires not just more finance but also sophisticated finance that can address the complex risks associated with an evolving technology.