From investment to impact: The role of green finance and technological innovation on German energy transition

Germany is a global leader in environmental protection and has embraced a fast-track transition towards renewable energy adaptation. To support the continuous energy transition, an approximate sum of EUR 3000 billion needs to be mobilized by 2050, making it an exemplary case for examining the influence of green finance on renewable energy consumption and technological innovation. The objective of this study is to investigate the impact of green finance and technological innovation on renewable energy consumption across 16 federal German states, utilizing panel data from 2008 to 2021. Two novel financial proxies, green investment and environmental protection-related sales, are introduced to capture the financial mechanisms underpinning the energy transition. MMQ (method of moments quantile) regression is employed to explore the short and long-run relationship among variables. The results reveal that while environmental protection-related sales consistently increase renewable energy consumption, the positive effects of green investment manifest only in the long term. Furthermore, the results indicate that solely increasing R&D funds does not necessarily boost renewable energy consumption. However, the positive interplay between R&D and patent applications significantly increases electricity generation from renewable sources. Indicating that integrated financial and technological strategies are essential for advancing Germany's renewable energy goals.