Towards green entrepreneurship: The role of financial openness in driving energy innovation in top carbon emitter economies

Abstract

Energy serves as a crucial input in almost every sector of the economy and thus contributes significantly to the development of an economy. However, energy is obtained chiefly from fossil fuels, the world's biggest source of carbon emissions and climate change. Therefore, transforming the energy sector by promoting energy innovation is crucial and requires massive financial support from financial institutions beyond borders. In this regard, an international collaboration between the financial sectors of various economies can increase the availability of funds for investment in energy innovation. Therefore, this study intends to investigate the role of financial openness in promoting energy innovation in different regions of the world, such as Asia, America, and Europe. For regression analysis, the study employs the linear and non-linear CS-ARDL methods of estimations. The key outcomes of the long-run linear analysis suggest that financial openness promotes energy innovation in all regions. In the non-linear analysis, the positive change in financial openness increases long-run energy innovation in all regions, while a negative change in financial openness reduces energy innovation in Global and Asia models. These findings imply that policymakers across the globe should focus on collaboration between the financial sectors to promote investment in energy innovation.