Renewable energy sector and energy transition in G-10 countries: Role of price, quantity and outcome based monetary policy

The global transition toward renewable energy is vital for achieving climate goals and strengthening energy security. The primary objective of the study is to examine the impact of different stances of monetary policy, namely price-based, quantity-based, and outcome-based monetary policy, on renewable energy dynamics in G10 economies, contributing to the evolving discourse on green central banking and the integration of low-carbon transition objectives within modern monetary policy. The empirical evidence of the study is based on the Fully Modified Ordinary Least Squares approach and Vector Error Correction Mechanism for both short and long run dynamics, a dynamic common correlated estimator to capture slope heterogeneity, quantile regression for asymmetric relationship, and panel structural VAR for shock propagation and variance contribution. The empirical findings reveal that monetary policy exerts heterogeneous yet significant effects on renewable energy and energy transition across G10 economies. Price-based policy exhibits a partially green effect, restricting renewable investment under high interest rates but supporting long-term transition via structural efficiency gains. Quantity-based policy shows consistently positive impacts by easing liquidity constraints and stimulating renewable deployment. Outcome-based policy, proxied by financial development, yields limited or even adverse effects due to structural lock-ins and path dependence in carbon-intensive finance. The results also confirm asymmetric and dynamic transmission, with liquidity shocks generating the strongest and most persistent responses. This study has critical policy implications regarding the integration of renewable energy development into the monetary policy framework by leveraging quantity-based tools and by addressing the carbon lock-in and path dependencies associated with financial development through accelerating divestment from fossil fuels.