The Role of Financial Development and Sustainable Development on Renewable Energy Innovation: The Moderating Role of Stringent Environmental Policies

Subject Areas : environmental management

alaa jasmmoammad ¹ , Hosein Sharifi Renani ² , Jalil Kamil Ghaidan ³ , masoud ramezani ⁴

1 - Ph.D Student Department of Economics, Isf.C., Islamic Azad University, Isfahan, Iran
2 - Department of Economics, Faculty of Governance, Isf.C., Islamic Azad University, Isfahan, Iran
3 - Department of Economics, Faculty of Management And Economics, Wasit University, Wasit, Iraq
4 - Faculty of Agriculture, Isf.C., Islamic Azad University, Isfahan, Iran

Received: 2025-09-28 Accepted : 2025-11-02 Published : 2025-12-13

Keywords: Financial Development, Sustainable Development, Renewable Energy Innovation, Stringent Environmental Policies.,

Abstract :

Considering the importance of innovation in renewable energy for reducing pollutant emissions and achieving sustainable development, this study was conducted under the title "The Role of Financial Development and Sustainable Development on Renewable Energy Innovation: The Moderating Role of Stringent Environmental Policies." The statistical population includes 15 developed and developing countries that provide reliable data on financial development, sustainable development, and renewable energy innovation. The sample consists of Germany, France, the United Kingdom, Sweden, Denmark, the Netherlands, the United States, Canada, Japan, South Korea, China, India, Brazil, South Africa, and Australia. The study period spans from 2010 to 2023. The dependent variable, renewable energy innovation, was measured by the number of registered patents, the independent variables are financial development and sustainable development, the moderating variable is stringent environmental policies, and the control variables include per capita GDP and oil prices, with all data extracted from reputable international databases. Results from the dynamic panel model using System Generalized Method of Moments (System GMM) indicate that financial development and sustainable development have a positive and significant effect on renewable energy innovation, and stringent environmental policies play a positive moderating role. Interaction effects further show that the presence of stringent policies strengthens the impact of financial development and sustainable development on renewable energy innovation. Additionally, per capita GDP has a positive effect, whereas oil prices have a negative effect on renewable energy innovation. In conclusion, the findings emphasize that the combination of financial development, enhanced sustainable development indicators, and the enforcement of stringent environmental policies can effectively stimulate the growth of clean energy technologies. Practical policy recommendations include targeted financial facilities, tax incentives, and strict environmental standards to promote economic motivation while ensuring long-term positive environmental and social impacts.

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