Renewable energy consumption, financial assistance, and eco-economic sustainability in developing countries

Muskan Sahu; Twinkle Prusty

doi:10.55429/ijabf.v5i2.389

Authors

Muskan Sahu Faculty of Commerce, Banaras Hindu University, Varanasi, India https://orcid.org/0009-0006-0865-7973
Twinkle Prusty Faculty of Commerce, Banaras Hindu University, Varanasi, India https://orcid.org/0000-0002-0646-5373

DOI:

https://doi.org/10.55429/ijabf.v5i2.389

Keywords:

Renewable energy consumption, Sustainability, Financial decision-making, FDI, Green finance

Abstract

Sustainability remains a major challenge for developing economies, where efforts to promote economic growth must be balanced with environmental protection. This study examines the impact of renewable energy consumption on economic and environmental sustainability in developing countries and investigates whether financial support strengthens these effects. Using panel data for 107 developing countries over the period 2000–2023, the study evaluates the relationships among renewable energy consumption, economic growth, and CO₂ emissions. It examines the moderating roles of foreign direct investment (FDI) and green finance. The findings indicate that renewable energy consumption significantly reduces CO₂ emissions, thereby contributing to environmental sustainability, but is associated with a negative effect on economic growth. Further, financial support significantly moderates the relationship between renewable energy consumption and sustainability outcomes. In particular, FDI and green finance strengthen the emissions-reducing effect of renewable energy while also amplifying its negative association with economic growth. These findings highlight the importance of designing financial and policy frameworks that facilitate renewable energy transitions while addressing their potential short-term economic costs. The study contributes to the sustainability literature by demonstrating that the effectiveness of renewable energy consumption depends not only on its direct environmental benefits but also on the financial conditions under which the transition occurs in developing economies.

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