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.