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Sustainable Financing for Sustainable Development: Agent-Based Modeling of Alternative Financing Models for Clean Energy Investments

Author

Listed:
  • Ibrahim Ari

    (Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Doha 34110, Qatar)

  • Muammer Koc

    (Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Doha 34110, Qatar)

Abstract

Renewable energy investments require a substantial amount of capital to provide affordable and accessible energy for everyone in the world, and finding the required capital is one of the greatest challenges faced by governments and private entities. In a macroeconomic perspective, national budget deficits and inadequate policy designs hinder public and private investments in renewable projects. These problems lead governments to borrow a considerable amount of money for sustainable development, although such excessive debt-based financing pushes them to unsustainable economic development. This substantial amount of borrowing makes a negative contribution to the high global debt concentration, putting countries’ economic and social development at risk. In line with this, excessive debt-based financing causes an increase in wealth inequality, and when wealth inequality reaches a dramatic level, wars and many other social problems are triggered to correct the course of wealth inequality. In this regard, the motivation behind the study is to develop a set of policy guidelines for sustainable financing models as a solution for these intertwined problems, which are: (1) a financial gap in energy investments; (2) an excessive global debt concentration; and (3) a dramatic increase in wealth inequality. To this end, this study presents a quantitative and comparative proof of concept analysis of alternative financing models in a solar farm investment simulation to investigate the change in wealth inequality and social welfare by reducing debt-based financing and increasing public participation. There are many studies in the literature investigating the evolution of wealth inequality throughout history. However, there is a gap in the literature, and investigating the effects of various policy rules on the evolution of wealth inequality in a future time frame needs to be explored in order to discuss possible policy implications beforehand. In this respect, this paper contributes to the literature by developing simulation models for conventional and alternative financing systems. This enables investigating the changes in wealth inequality and social welfare as a result of various policy implications throughout the simulation time.

Suggested Citation

  • Ibrahim Ari & Muammer Koc, 2019. "Sustainable Financing for Sustainable Development: Agent-Based Modeling of Alternative Financing Models for Clean Energy Investments," Sustainability, MDPI, vol. 11(7), pages 1-34, April.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:7:p:1967-:d:219446
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    References listed on IDEAS

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    Cited by:

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    2. Thomas Baldauf & Patrick Jochem, 2024. "Project finance or corporate finance for renewable energy? an agent-based insight," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 19(4), pages 759-805, October.
    3. Mukhtasor Mukhtasor & Lisa Listiana & Irvan Hermala & Najim Nur Fauziah, 2023. "Scaling up Renewable Energy Financing through Islamic Blended Finance: Case Study in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 634-644, September.
    4. Ari, Ibrahim & Koc, Muammer, 2021. "Philanthropic-crowdfunding-partnership: A proof-of-concept study for sustainable financing in low-carbon energy transitions," Energy, Elsevier, vol. 222(C).
    5. Oana Oprisan & Speranta Pirciog & Alina Elena Ionascu & Cristina Lincaru & Adriana Grigorescu, 2023. "Economic Resilience and Sustainable Finance Path to Development and Convergence in Romanian Counties," Sustainability, MDPI, vol. 15(19), pages 1-24, September.
    6. Chen Zhang & Xinghua Dang & Tao Peng & Chaokai Xue, 2019. "Dynamic Evolution of Venture Capital Network in Clean Energy Industries Based on STERGM," Sustainability, MDPI, vol. 11(22), pages 1-25, November.

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