Green finance, carbon emissions and total factor productivity in Africa; The mediating role of renewable energy

Abstract

Green finance as a driver of sustainable development promotes investment into environmentally friendly project such as renewable energy. In Africa, where climate change impacts and economic development overlap, green finance represents a chance to address global warming while enhancing productivity. This study aims to determine the influence of green finance on total factor productivity and carbon dioxide emission. The study retrieves data of 46 African countries spinning from 2000 to 2019. The study analyses the results using the Panel Corrected Standard Error (PCSE) estimate approach. The study finds that green finance improves total factor productivity in Africa. The study also reveals that green finance increases total factor productivity in upper-middle-income and lower-middle-income countries by 0.55 and 0.47 respectively. However, it reduces total factor productivity in low-income countries by 0.27. The study further finds that green finance reduces carbon emissions in Lower middle-income and low-income countries by 0.06 and 0.05 respectively. However, it increases carbon emissions in upper-middle-income countries by 0.15. The study also finds that renewable energy serves as a pathway through green finance improves total factor productivity and reduces carbon emission. The study recommends that the government should invests more in renewable energy technologies and environmentally friendly projects.