Journey To Net-Zero and Investment In Renewable Energy: Evidence From Developed and Developing Countries

This paper examines the role of the geopolitical risk and high technology exports in promoting investment in renewable energy (IRE) which is a key indicator proxy in the journey to net zero following the Paris Agreement, by testing a global panel with 103 countries during 2007-2021. We draw on Strategic Contingency Theory and obtain empirical evidence by estimating OLS regression, fixed-effect panel regression, two-step GMM-system regression, and the Difference-in-Difference model. The results show that the Paris Agreement’s onset period is 3-4 years for significantly effective action. Furthermore, geopolitical risk negatively impacts IRE only in developed countries, while the positive effect of high-technology exports is significant and consistent among models only in developing countries. This article also highlights the mechanism that high technology exports promote the IRE, explained by the leading role of counterparty companies pursuing high ESG scores and low carbon emissions. Finally, in terms of policy implications, we argue that developed nations would need to engage in more stringent targets in their IRE investments which are a contributory proxy in the journey to net zero and a response to climate change.