Carbon Emissions and Clean Energy Investment: Global Evidence

ABSTRACT

Under the premise of the detrimental effects of carbon emission on the global climate, the role of governments in promoting clean energy investment has become more important, and monetary policy as one government tool has drawn greater attention among the public. Our research successfully develops a new model that links clean energy investments with monetary policies and carbon emissions in 9 Asian economies spanning the period from 1996 to 2018. First, from the results of cointegration tests, we find a long-term relationship among the variables. Second, using FMOLS estimators, our paper reveals that expansionary monetary policy promotes clean energy investment and that its effect is stronger in developing countries. Third, we find a positive relationship between CO2 emissions and clean energy investment in the full sample but the relationship becomes negative in developing countries. Accordingly, the paper offers suggestions on possible policy initiatives to improve clean energy investment.

KEYWORDS:

• Climate change
• monetary policy
• clean energy investment
• panel cointegration

JEL:

• Q54
• Q20

Acknowledgments

Dan Zhang is grateful to Chun-Ping Chang for his guidance on an earlier version of this article. Dan Zhang thanks financial support from National Natural Science Foundation of China (72072144, 71672144, 71372173, 70972053); the key project of Shaanxi soft science research plan (2019KRZ007); Science and Technology Research and Development Program of Shaanxi Province (2021KRM183, 2017KRM059, 2017KRM057, 2014KRM28-2); Key Project of Soft Science Research Program of Xi'an Science and Technology Bureau (21RKYJ0009).

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. Ministry of Finance, Circular on the Issuance of Opinions on Financial Support for Carbon Peak and Carbon Neutrality, retrieved from http://www.gov.cn/zhengce/zhengceku/2022-05/31/content_5693162.htm