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Who's Going Green and Why? Trends and Determinants of Green Investment

Author

Listed:
  • Luc Eyraud
  • Changchang Zhang
  • Abdoul A Wane
  • Benedict J. Clements

Abstract

This paper fills a gap in the macroeconomic literature on renewable sources of energy. It offers a definition of green investment and analyzes the trends and determinants of this investment over the last decade for 35 advanced and emerging countries. We use a new multi-country historical dataset and find that green investment has become a key driver of the energy sector and that its rapid growth is now mostly driven by China. Our econometric results suggest that green investment is boosted by economic growth, a sound financial system conducive to low interest rates, and high fuel prices. We also find that some policy interventions, such as the introduction of carbon pricing schemes, or "feed-in-tariffs," which require use of "green" energy, have a positive and significant impact on green investment. Other interventions, such as biofuel support, do not appear to be associated with higher green investment.

Suggested Citation

  • Luc Eyraud & Changchang Zhang & Abdoul A Wane & Benedict J. Clements, 2011. "Who's Going Green and Why? Trends and Determinants of Green Investment," IMF Working Papers 11/296, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/296
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    References listed on IDEAS

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    4. Parry, Ian W.H., 2012. "Reforming the tax system to promote environmental objectives: An application to Mauritius," Ecological Economics, Elsevier, vol. 77(C), pages 103-112.
    5. Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
    6. P. Guerrieri & M. Luciani & V. Meliciani, 2011. "The determinants of investment in information and communication technologies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(4), pages 387-403.
    7. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    8. Stern, David I., 2014. "The Environmental Kuznets Curve: A Primer," Working Papers 249424, Australian National University, Centre for Climate Economics & Policy.
    9. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    10. Stern, David I. & Common, Michael S. & Barbier, Edward B., 1996. "Economic growth and environmental degradation: The environmental Kuznets curve and sustainable development," World Development, Elsevier, vol. 24(7), pages 1151-1160, July.
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    Cited by:

    1. Andreas Welling, 2017. "Green Finance: Recent developments, characteristics and important actors," FEMM Working Papers 170002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    2. Ng, Thiam Hee & Tao, Jacqueline Yujia, 2016. "Bond financing for renewable energy in Asia," Energy Policy, Elsevier, vol. 95(C), pages 509-517.
    3. Gugler, Klaus & Haxhimusa, Adhurim & Liebensteiner, Mario & Schindler, Nora, 2016. "Investment under Uncertainty in Electricity Generation," Department of Economics Working Paper Series 5177, WU Vienna University of Economics and Business.
    4. repec:eee:enepol:v:110:y:2017:i:c:p:234-245 is not listed on IDEAS

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