Foreign Investments and Energy Transformation: Impacts on Energy Poverty, Renewable Adoption, and Emission Reduction in Developing Countries

ABSTRACT This study investigates the impact of foreign financial investment in renewable energy on energy poverty, renewable energy adoption, and emissions in developing countries. Using a dynamic panel model to address endogeneity, it offers empirical insights into how international climate finance supports sustainable energy transitions. The results show that such investment improves clean energy access, electricity access, and consumption, strengthening both availability and reliability. It also increases renewable electricity output and the share of renewables in energy generation, though effects on renewable energy consumption are more limited. Emissions of carbon dioxide and greenhouse gases decline, while effects on per‐capita emissions and carbon intensity are smaller. Lagged models reveal that these benefits persist over time. Impacts vary across regions and country characteristics, particularly fossil fuel dependency, economic growth, and foreign capital intensity. The findings offer actionable insights for designing more effective international climate finance strategies aligned with global energy and climate goals.