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Finance for Renewable Energy: An Empirical Analysis of Developing and Transition Economies

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Abstract

This paper examines the role of the financial sector in renewable energy (RE) development. Although RE can bring socio-economic and environ- mental benefits, its implementation faces a number of obstacles, especially in non-OECD countries. One of these obstacles is financing: underdevel- oped financial sectors are unable to efficiently channel loans to RE produc- ers. The influence of financial sector development on the use of renewable energy resources is confirmed in panel data estimations on up to 119 non- OECD countries for 1980-2006. Financial intermediation, in particular commercial banking, has a significant positive effect on the amount of RE produced, and the impact is especially large when we consider non- hydropower RE such as wind, solar, geothermal, and biomass. There is also evidence that the adoption of the Kyoto Protocol has had a significant positive impact on the development of the RE sector.

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Bibliographic Info

Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 09/117.

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Length: 37 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:eth:wpswif:09-117

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Keywords: renewable energy; financial sector; banking; development;

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References

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  1. Barbier,Edward B., 2010. "A Global Green New Deal," Cambridge Books, Cambridge University Press, number 9780521763097, October.
  2. Colin Mayer & Wendy Carlin, 1999. "Finance, Investment and Growth," Economics Series Working Papers 1999-FE-09, University of Oxford, Department of Economics.
  3. Tharakan, Pradeep J. & de Castro, Julio & Kroeger, Timm, 2007. "Energy sector assistance in developing countries: Current trends and policy recommendations," Energy Policy, Elsevier, vol. 35(1), pages 734-738, January.
  4. Christa N. Brunnschweiler, 2006. "Financing the alternative: renewable energy in developing and transition countries," CER-ETH Economics working paper series 06/49, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  7. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
  8. Tadesse, Solomon, 2002. "Financial Architecture and Economic Performance: International Evidence," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 429-454, October.
  9. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1999. "Institutions, financial markets, and firm debt maturity," Journal of Financial Economics, Elsevier, vol. 54(3), pages 295-336, December.
  10. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  11. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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Cited by:
  1. Popp, David, 2012. "The role of technological change in green growth," Policy Research Working Paper Series 6239, The World Bank.
  2. David Popp, 2012. "The Role of Technological Change in Green Growth," NBER Working Papers 18506, National Bureau of Economic Research, Inc.
  3. Zhao, Yong & Tang, Kam Ki & Wang, Li-li, 2013. "Do renewable electricity policies promote renewable electricity generation? Evidence from panel data," Energy Policy, Elsevier, vol. 62(C), pages 887-897.
  4. Dulal, Hari Bansha & Shah, Kalim U. & Sapkota, Chandan & Uma, Gengaiah & Kandel, Bibek R., 2013. "Renewable energy diffusion in Asia: Can it happen without government support?," Energy Policy, Elsevier, vol. 59(C), pages 301-311.
  5. Shaikh, Salman, 2013. "Global Competitiveness: Challenges & Solutions for Pakistan," MPRA Paper 53796, University Library of Munich, Germany.
  6. Dutz, Mark A. & Sharma, Siddharth, 2012. "Green growth, technology and innovation," Policy Research Working Paper Series 5932, The World Bank.
  7. Pfeiffer, Birte & Mulder, Peter, 2013. "Explaining the diffusion of renewable energy technology in developing countries," Energy Economics, Elsevier, vol. 40(C), pages 285-296.
  8. Shaikh, Salman, 2014. "Tax Increment Financing in Pakistan," MPRA Paper 53801, University Library of Munich, Germany.

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