Work

Climate commitments, green finance, and carbon markets' effect on renewable energy deployment in the post-Paris agreement era

Year: 2026

Type: article

Abstract: This study examines the determinants of renewable energy activity in the post-Paris Agreement era by focusing on the roles of economic conditions, climate policy commitments, sustainable finance, and carbon market dynamics in advanced and major emerging economies. Using a heterogeneous dynamic panel framework, including the Mean Group (MG), Dynamic Mean Group (DMG), and Common Correlated Effects Mean Group (CMG), estimators complemented by a panel vector autoregression (PVAR) approach, the analysis captures both country-specific adjustment processes and globally shared shocks across advanced and emerging economies. The results reveal strong persistence in renewable energy activity, highlighting the path-dependent and slow-moving nature of energy transitions. Economic activity and the post-Paris policy environment are positively and significantly associated with renewable energy dynamics, while carbon market conditions exhibit an additional positive association with clean energy deployment. In contrast, short-run variations in green bond issuance and financial market conditions exhibit limited immediate effects, reflecting the long-term orientation of sustainable finance. The attenuation of several effects under CMG estimation underscores the importance of global common factors, including geopolitical disruptions and synchronized macro-financial cycles. Overall, the findings highlight significant relationships between domestic economic capacity, the post-Paris climate policy environment, international market forces, and renewable energy deployment across the sample of advanced and major emerging economies.

Source: Environmental and Sustainability Indicators

DOI: 10.1016/j.indic.2026.101527

Authors: Mohammad Sharif Karimi, Kamel Si Mohammed, Omar A. Esqueda, Naveen Mahasen Weerasinghe