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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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  • Christa N. Brunnschweiler, 2009. "Finance for Renewable Energy: An Empirical Analysis of Developing and Transition Economies," CER-ETH Economics working paper series 09/117, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:09-117
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    Keywords

    renewable energy; financial sector; banking; development;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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