Assessing the economic impact of green finance and renewable energy use on environmental sustainability in high-polluting sectors

This paper investigates the effects of renewable energy development (RED) on green economic growth (GEG) using green technical innovation (GTI) and green finance (GF) in high-polluting sectors spanning developing nations. The paper examines dynamic links between renewable energy development, green technical innovation, green finance, and environmental sustainability across four key emerging economies using a Time-Varying Parameter Vector Auto Regression (TVP-VAR) model. The results show that higher investments improve environmental performance and economic sustainability in green finance and renewable energies. Driven chiefly by green total factor productivity developments and intra-industry innovation, a 1 % increase in green credit results in a 0.482 % increase in green GDP. Still, high expenses related to the acceptance of renewable energy keep major implementation hampered. The paper emphasizes how improving sustainable economic development while minimizing environmental externalities depends on efficient policy mechanisms like focused green credit programs and technologically driven incentives. These realizations support the debate on policies combining green finance with renewable energy solutions to reach carbon neutrality and sustainable economic changes in underdeveloped countries.