How Climate Finance and Digitalization Boost Green Growth in Developing Countries

What is it about?

This research employs the method of moments quantile regression (MMQR) approach to examine the heterogeneous effects of climate-related development finance (CDF), digital infrastructure (DI), and financial development (FD) on material productivity (MP) and energy intensity (EI) across 87 developing countries from 2000 to 2020. The study investigates how these factors contribute to sustainable consumption and production, with a particular focus on the heterogeneity of FD. The findings indicate that CDF, FD, and DI positively influence MP and energy efficiency (EE), with developing countries having a higher distribution of MP benefiting more from CDF and FD. Additionally, countries with lower EI gain more from CDF and FD, demonstrating a reduction in energy intensity. The study also highlights that improvements in DI lead to greater benefits for countries with higher MP and EI distribution. Overall, the research underscores the role of CDF, DI, and FD in enhancing resource productivity and energy efficiency in developing nations.

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Photo by micheile henderson on Unsplash

Photo by micheile henderson on Unsplash

Why is it important?

This study investigates the varying impacts of climate-related development finance (CDF), digital infrastructure (DI), and financial development (FD) on material productivity (MP) and energy intensity (EI) across developing countries. The significance of this research lies in its potential to inform policy decisions aimed at enhancing sustainable consumption and production, crucial components of the Sustainable Development Goals (SDGs). By exploring the interactions between CDF, DI, and FD, the study offers insights into how developing countries can improve resource efficiency and reduce energy consumption, thus contributing to global environmental sustainability efforts. Key Takeaways: 1. The research demonstrates that climate-related development finance (CDF) and financial development (FD) positively influence material productivity (MP) and energy efficiency (EE) in developing countries, with higher benefits observed in countries with a greater distribution of MP. 2. Findings reveal that developing countries with lower energy intensity (EI) benefit more from CDF and FD, as indicated by the decreasing EI coefficients across quantiles, suggesting a critical role for these financial mechanisms in promoting energy efficiency. 3. The study highlights that improvements in digital infrastructure (DI) lead to greater gains in both material productivity and energy intensity, especially in countries with higher distributions of these metrics, underscoring the importance of technological advancements in sustainable development.