Financial mechanisms for energy transitions: a review article

Abstract

Purpose The transition from fossil fuel-based energy systems to renewable energy sources, commonly referred to as the energy transition, is essential for combating climate change. However, comprehensive studies that thoroughly examine the financial mechanisms involved in this process are lacking. Despite the availability of various financial tools, there is a notable absence of extensive research that synthesizes and categorizes these mechanisms into broad groups. Design/methodology/approach A systematic literature review is used to explore a comprehensive framework for financial mechanisms related to the energy transition and their application across six stages of the process. Findings The framework of financial mechanisms for energy transition encompasses these six factors: public financing mechanisms, private financing mechanisms, market-based mechanisms, innovative financing mechanisms, risk mitigation instruments and institutional support and capacity building. Originality/value This is the first study that thoroughly reviewed the financial mechanisms involved in the energy transition process.