Environmental policy stringency, technology innovation finance, and energy efficiency for green growth under uncertainty

Employing comprehensive multidecade panel data of the International Energy Agency (IEA) member countries, the study examines the effects of Energy Technology RD&D Budgets for Energy Efficiency across uncertainty episodes. The study shows the favorable value of technology innovation for green growth through a constant predicted decrease in energy intensity levels. Global economic and climate policy uncertainties induce a decreased marginal joint effect of technological innovation finance on energy efficiency. However, the long-term green value of energy efficiency innovation finance remains inevitable across uncertainty scenarios. Environmental policy stringency and the global climate transition are the two important drivers of the green value of energy efficiency innovation finance. Evolving stringent environmental policies and innovation finance commitment benefit the IEA-member countries with constantly enhanced energy efficiency levels for economic activities, by their critical contributions to green growth. The study validates their empirical predictions through a battery of panel data estimators, difference-in-differences (DID) regressions with a matched sample by propensity scores matching (PSM). The findings remain robust when we test for sub-samples excluding the COVID-19 pandemic, as well as a rich set of policy uncertainty measures and sovereign social, environmental, and governance (ESG) factors included in our fitted models.