Green Financing, Energy Transformation, and the Moderating Effect of Digital Economy in Developing Countries

Abstract

The energy sector in many developing nations faces the difficulty of insufficient financing throughout the low-carbon transition, highlighting the importance of international green financing in alleviating financial constraints. The advancement of digital technology could facilitate green financing for energy transition in the digital economy, but this statement lacks empirical evidence. The primary objective of this research is to investigate the impact of international green financing on low-carbon energy transformation in developing nations. Additionally, we investigate the moderating role of digital economy between the two. Our findings validate the favorable impact of international green financing on low-carbon energy transformation, and this impact is particularly evident for hydro and wind energy consumption. We show that this beneficial effect is greater for low-income countries or regions with high levels of energy transition. We also provide evidence of the positive moderation effects of digital economy and find that its effects are still present in the transition to hydro and wind energy. This research helps to broaden green financing channels for the energy sector in developing countries, especially from the perspective of digital economy.