Green finance, private investments and fossil fuels rents

Abstract

Private investment and green finance have significantly influenced the fossil fuel industries in various countries. This study investigates the impact of green finance and private investment on fossil fuel rents in 20 major carbon-emitting nations from 2000 to 2020. Using ARDL estimation, findings reveal that a 1% increase in green finance reduces fossil fuel rents by 0.37% in the short term and 0.40% in the long term, driven by greater investments in sustainable energy. Conversely, a 1% increase in private investment leads to a 0.17% short-term and 0.23% long-term rise in fossil fuel rents, indicating limited private green investment. To address this gap, the study recommends policies such as green bond incentives, strengthened ESG reporting, improved financial risk management, enhanced business climates, digitalization of green financial markets, and sustainable governance in the fossil fuel sector.