This study examines the effect of international financial flows, including investments
and development assistance, on the expansion of renewable energy technologies. It
also seeks to investigate the impact of the sectoral economy on the proportion of
renewable energy consumption in Ethiopia. This study used an explanatory research
design and a quantitative research approach. An autoregressive distributed lag model
was applied to explore the long and short-term relationship among variables. A time
series of data aggregated and disaggregated ranging from 2000 to 2022 was used. According
to this study, sustainable finance programs are essential for advancing and aiding
renewable energy projects in the long and short term. Ethiopia’s use of renewable
energy will increase as sustainable finance rises. The main economic sectors determining
Ethiopia’s consumption of renewable energy in the long and short term include the
manufacturing, mining and service industries. This study’s findings imply that policies
focusing on providing continuous financial support and fostering international cooperation
to promote the development of the manufacturing sector are needed. This could include
incentives for adopting renewable energy technologies and investing in renewable energy
infrastructure. On the other hand, since the service and mining industries negatively
impact renewable energy use, there is a need to diversify renewable energy sources
beyond these sectors. This could involve promoting renewable energy projects in other
sectors, such as manufacturing, agriculture, construction and trade. Based on the
findings of this study, it is suggested that policymakers carefully consider the consequences
within each economic sector when formulating decisions related to renewable energy.
This study is novel in presenting empirical evidence linking renewable energy use
to long- and short-term economic growth.
