Can natural disasters and financial technology (FINTECH) facilitate trade in low-carbon energy source technologies? An empirical evaluation from OECD economies

Abstract

Countries around the world are taking various measures to combat climate change. Low-carbon energy technology development can significantly assist in addressing this issue. However, due to having fewer resources, not all countries can produce low-carbon energy and have to rely on the trade of low-carbon energy resources. The purpose of this study is to investigate the determinants of low-carbon energy technology trade (LOWT) in 36 Organisation for Economic Cooperation and Development (OECD) countries between 2010 and 2020, and to examine the role of financial technology (FinTech) in this trade in particular. To this end, control variables such as natural disasters, per capita income, population, and institutional quality were also included in the model. Three different methods were used in the empirical analysis: System Generalised Method of Moments (System GMM), machine learning, and moment-based quantile regression panel method (MMQREG). These methods allow for the examination of both dynamic dependence and heterogeneous effects at the quantile level. The findings of the study show that the adoption of financial technology increases trade in low-carbon energy sources in OECD countries. The effects of other variables, such as natural disasters, were also found to be positive for participation in low-carbon energy trade, while institutional quality, income, and population improve this trade. However, according to the MMQREG estimate, population and institutional quality are not significant in higher percentiles. In light of these results, policymakers are advised to support FinTech-based green finance instruments and reduce trade barriers to low-carbon technologies. This approach is consistent with the Paris Climate Agreement and the United Nations Sustainable Development Goals (SDG) (particularly SDG 7: Affordable and Clean Energy, SDG 16: Peace, Justice, and Strong Institutions).