Apiaty Kamaluddin Faculty of Agriculture, Universitas Pepabri, Makassar, Indonesia
Email: apiatyamin53@gmail.com

Abstract:

Previous studies have investigated the influence of financial development on carbon emissions. However, there has been limited research conducted on the effects of green financing, specifically on carbon reduction. In order to address the aforementioned issue, the current study proposes the development of a green financing development index that incorporates four key factors: green credit, green investment, green insurance, and green securities. Utilising data spanning from 2000 to 2020, this study employs a vector error correction model (VECM) to investigate the interrelationships between the pace of green financing advancement, non-fossil energy utilisation, and carbon intensity. The findings indicate that the green finance sector in Indonesia experienced rapid growth. Additionally, the development index for green financing and the adoption of non-fossil energy sources were found to be associated with a decrease in carbon intensity. Similarly, an increase in the severity of carbon emissions has impeded the growth of non-fossil fuel energy consumption and has also hindered the funding of environmentally friendly initiatives, ultimately impeding the advancement of green finance. Moreover, the integration of green finance and carbon intensity played a pivotal role in shaping the adoption of non-fossil energy sources in Indonesia, yielding significant outcomes driven by policy measures. As a result, the outcomes of green finance initiatives have consistently proven to be inadequate and unsuccessful. The paper proposes strategies to bolster the implementation of green finance policies, promote the adoption of non-fossil energy sources, and establish a carbon trading platform.

Keywords:Carbon severity, non-fossil energy usage, index of green finance development, Emission depletio.