Efficiency of green bond clean energy oil price and geopolitical risk on sectoral decarbonization: Evidence from the globe by daily data and marginal effect analysis

Abstract

The increasing global emphasis on environmental sustainability has amplified the strategic relevance of green finance and clean energy within decarbonization initiatives. In alignment with this paradigm the present study empirically investigates the impact of green bonds (GBs) and various subcategories of clean energy production (EP) while accounting for oil price dynamics and geopolitical risk (GPR) across the period from January 1 2019 to July 31 2024. The analysis employs the Kernel-Based Regularized Least Squares (KRLS) methodology to capture the marginal effects of these variables on sector-specific decarbonization outcomes. The empirical findings reveal several key insights: (i) neither GBs nor nuclear EP effectively contribute to sectoral decarbonization, (ii) hydro EP enhances decarbonization in the residential sector, (iii) solar EP significantly supports decarbonization in both the power generation and residential sectors, (iv) wind EP facilitates decarbonization particularly in the transportation and power sectors, (v) elevated oil prices and heightened geopolitical risk are associated with improved decarbonization outcomes in the industrial and power sectors, (vi) the KRLS model demonstrates a robust predictive capability achieving an accuracy rate of approximately 97 %, and (vii) the marginal effects of the independent variables are heterogeneous across sectors determinants and distributional percentiles. These results substantiate the argument that while GBs currently fall short in delivering effective decarbonization specific clean EP modalities alongside market and geopolitical conditions exert varied and sector-dependent influences. Thus the study offers critical empirical evidence to inform policymakers and investors regarding the nuanced role of green finance and clean EP in advancing global decarbonization agendas. © 2025 Elsevier B.V. All rights reserved.