3.3 6.

Review

A Bibliometric and Literature

Review: Alignment of Green
Finance and Carbon Trading

Dian Permata Sari Mashari, Teuku Yuri M. Zagloel, Tri Edhi Budhi Soesilo and Istiana Maftuchah

https://doi.org/10.3390/su15107877
 sustainability

Review
A Bibliometric and Literature Review: Alignment of Green
Finance and Carbon Trading
Dian Permata Sari Mashari 1, *, Teuku Yuri M. Zagloel 2 , Tri Edhi Budhi Soesilo 1 and Istiana Maftuchah 3

1 School of Environmental Science, University of Indonesia, Jakarta 14440, Indonesia

2 Department of Industrial Engineering, Faculty of Engineering, University of Indonesia,
Jakarta 14440, Indonesia
3 Indonesia Financial Services Authority (OJK), Jakarta 10710, Indonesia
* Correspondence: [email protected]

Abstract: The issue of climate change is highly related to carbon emissions. One of the practical
efforts to reduce carbon emissions is through carbon trading and offset mechanisms. Implementing
carbon trading demands massive funding allocation, which requires sustainable financial policy
arrangements from the government and the private sector as an instrument to support nationally
determined contributions under the Paris Agreement. However, only a few review articles look
into the specific combination of green finance (also known as sustainable financing) and the carbon
trading mechanism. In this study, we aim to review research on green finance and its association
to the emission reduction and carbon trading. We utilized the VOSviewer framework to perform a
bibliometric analysis on the Scopus database, and performed search, identification, and screening
processes using selected relevant keywords. We obtained 506 articles from 2014 to 2022 related to
sustainable finance and carbon trading aspects. Using rigorous bibliometric approaches, we identified
both established and recent research clusters for topological analysis, identification of major research
subjects, interdependencies, and trends in collaborative effort. The results indicate that there is ample
room for additional research to link carbon trading with green finance initiatives or financing, which
can improve the success of carbon trading activities.

Keywords: sustainable finance; green finance; carbon trading; emission trading system; emission;
Citation: Mashari, D.P.S.; Zagloel, sustainable economic growth; environmental protection; literature review; bibliometric analysis
T.Y.M.; Soesilo, T.E.B.; Maftuchah, I.
A Bibliometric and Literature Review:
Alignment of Green Finance and
Carbon Trading. Sustainability 2023, 1. Introduction
15, 7877. https://doi.org/10.3390/
Global warming significantly contributes to global climate change, and reducing
su15107877
greenhouse gas (GHG) emissions is necessary to avoid the most catastrophic effects of
Academic Editor: David K. Ding global warming. By adopting the COP-21 of the United Nations Framework Convention
Received: 20 February 2023
on Climate Change (UNFCCC) via the Paris Agreement, officials worldwide agreed that
Revised: 25 March 2023
the average global temperature should not exceed 1.5 degrees Celsius above pre-industrial
Accepted: 17 April 2023
levels. The financial issue has gained a major position as a result of the recent COP-27. It
Published: 11 May 2023 was stated during the COP-27 conference that a substantial increase in financial resources
is required to facilitate the implementation of actions outlined in the nationally determined
contributions (NDCs) and long-term strategies. Recent progress in this regard has been
observed in the financial sector, where portfolios have been adjusted to support the transi-
Copyright: © 2023 by the authors. tion to a net zero economy, but more must be done to leverage the trillions necessary to
Licensee MDPI, Basel, Switzerland. implement low-emission, climate-resilient development pathways. All parties are now
This article is an open access article genuinely concerned with greenhouse gas (GHG) reduction via a financial stimulus, which
distributed under the terms and makes the situation captivating.
conditions of the Creative Commons In the last decade, researchers and policymakers have also become greatly interested
Attribution (CC BY) license (https://
in analyzing the role of ecology and finance. There is a need to synergize multidisciplinary
creativecommons.org/licenses/by/
knowledge and expertise to combat climate change. The higher the population, the higher
4.0/).

Sustainability 2023, 15, 7877. https://doi.org/10.3390/su15107877 https://www.mdpi.com/journal/sustainability

Sustainability 2023, 15, 7877 2 of 18

the chances of environmental problems. However, there is always a limit to population

growth on Earth. Limiting elements such as light, water, temperature, space, nutrition,
or exposure to predators or infectious illnesses eventually determines the population
size limit of a rapidly expanding population [1]. Zhang et al. (2019) mentioned that the
objectives of developing sustainable (green) finance are to provide proper financial tools
to achieve sustainable economic development [2]. Several studies also have stated that
financial market participants are currently very concerned about the issue of financial
system resilience against environmental pollution and its sustainability [3–5].
To accomplish climate objectives, the world must transition to a greener, more climate-
resilient economy, where green finance will stimulate the development of greener infrastruc-
ture and innovation [6]. Several jurisdictions have varying definitions of “green finance,”
an important investment and financing tool. The European Commission viewed it as a
financial tool to help the adaptation, mitigation, and other green aspects of the environ-
ment. In order to combat climate change, this can be formed out of green bonds, green
credit, green funds, and carbon finance. Eventually, resources will be allocated to green
development projects for sustainable environments [7,8]. Additionally, it has been observed
that over the past several years, green financial considerations have changed from being
risk mitigation strategies to constituting a catalyst for innovation and brand-new prospects
that will ultimately benefit businesses and society.
The results of the financial system and financial competence on carbon emissions are
complex and varied [9]. The development of sustainable financial strategies could overcome
and reduce emissions yielded from environmental indicators, such as manufacturing
actual waste [10]. On the assumption that the financial perspective ignores ecology or
the environment, it can lead to a growing record of environmental difficulties, such as
the destruction of biodiversity, climate change, contamination, and exhaustion of natural
resources. Financial policies play an essential and fundamental role in environmental
protection, but only a little has been accomplished in blending ecological concerns with
finance and economics.
The implications of green finance can be seen in the reduced amount of carbon dioxide
emissions. The authors Le et al. considered the issue from the point of view of financial
inclusion and came to the conclusion that the growth of inclusive finance would lead to a
lowering in carbon emissions [11]. In addition, the financial sector’s banking, insurance,
and investment activities now take climate change into consideration. This business must
deal with a number of climate-change-related obstacles, including regulations that aim
to limit GHG emissions, physical changes caused by climate change, and the need for
adequate legal governance. Companies in various sectors of the economy will be subjected
to this pressure, with some affected more than others. Companies in the financial services
industry have a responsibility to prepare to assist clients and businesses in coping with the
effects of climate change, as well as to develop products and services that reduce the risk of
a carbon-constrained society causing economic instability [12].
Furthermore, due to the high complexity and multiple dimensions of ecological and
environmental problems, it is difficult to finance ecological and environmental restoration
only using existing government assistance and policies [2]. Therefore, a market mechanism
(supply and demand) is required to secure sufficient funding for ecological and environ-
mental projects. In this instance, sustainable finance encompasses the role of the financial
services sector and other private financing. One of the problems caused by the energy
transition and climate change is paying for mitigation and adaptation activities and closing
the funding gap to pay for the necessary investments in low-carbon industries, as well as
what risks, opportunities, and incentives the government can offer. Creating conducive
policies, particularly for the economic and financial sectors, presents a challenge for several
nations, especially developing countries.
For developing countries, especially those without long-standing domestic financial
exchanges and established institutional commodity markets, green finance can be a critical
element to support and enhance the effectiveness and efficiency of the carbon market in
Sustainability 2023, 15, 7877 3 of 18

carbon trading. There are several terms used to depict the actual meaning of green finance,
such as “sustainable finance”, “environmental finance”, “climate finance” and “green
investment” [13]. For alignment purposes, we utilize the terms “sustainable finance”,
“green finance” and “carbon finance” to refer to financing support for the purpose of
decarbonization. IFC (2009) described green finance as investment solutions that protect the
environment, promote social justice, and stimulate economic growth [14]. There has been a
significant increase in financial institutions worldwide beginning to implement and adopt
lending systems, policies and practices to reduce businesses’ environmental, social and
economic impact. Financial institutions (banks) play an important role as intermediaries to
absorb, allocate and distribute idle funds in society for economic growth [15,16].
Article 6 of the Paris Agreement is the key tool to boost climate ambition by governing
the carbon market. It mobilizes resources to allow countries and companies to actualize
the low-carbon transition, and hence, be able to achieve the goal of net zero emissions
in the most effective way. Several academics have conducted studies indicating that the
purpose of green finance is to finance green companies, assist in the improvement of
environmental quality, and encourage technical innovation in green sectors. It has also been
demonstrated that green money may significantly contribute to emission reductions [17–19].
GHG reduction may be pursued through a variety of methods. A carbon price mechanism
is one of the most economical means of reducing greenhouse gas emissions. Under a
carbon pricing system, governments impose a cost on businesses and other entities that
emit significant amounts of CO2 in order to provide an economic incentive to reduce such
pollution. Carbon pricing can be implemented in multiple ways. A survey of policy practice
categorized carbon pricing mechanisms as falling into three main types: cap and trade
emission trading systems, carbon taxation and hybrid systems that blend taxation and
emission trading schemes [20]. Under an emission trading scheme (ETS), the government
sets a cap on emissions or emission intensity, and then issues allowances to firms that can
choose to sell their allowances to firms with higher abatement costs or use the allowances
for a set period of time before surrendering them back to the government. Typically, the
government gives primary allowances to regulated industries for free or sells them at
auction to establish a base price.
This paper aims to review the literature that discusses the extent to which green
finance or sustainable finance has been a potential factor to speed up the implementation
of cap-and-trade (carbon trading). The literature review is ultimately aimed at identifying
the lack of information on how green finance can take place to support the carbon market.
This article will address the following research questions:
a. What is the trend in the number of publications within the research field?
b. Which nations, organizations, publications, subject areas, and writers are most promi-
nent in the current research field?
c. What are the main research directions in the current field?
d. How effective is the development of studies on the application of green finance in
carbon trading transactions in reducing emissions?
The structure of this paper is as follows. Following the introduction, the second sec-tion
reviews the literature on the transformation of carbon trading, as well as the integra-tion of
green finance (or sustainable finance and climate finance). The third section dis-cusses the
analytical method used and the bibliometrics as part of a systematic literature review, along
with the structure of the keyword search filtering used. The fourth section discusses the
search results and the network analysis using VOSViewer, as well as key-words, countries,
and methods used in the selected articles.

2. Materials and Methods

To perform this research, we focused on any financing that covers environmental,
social and governance aspects to reduce carbon emission and to support the Sustainable
Development Goals (SDGs). The financial sector plays a crucial role in accelerating the post-
COVID-19 economic recovery process, primarily by transforming conventional business
Sustainability 2023, 15, 7877 4 of 18

patterns to become sustainable through the implementation of environmental, social, and

governance aspects. The role and support of sustainable finance to support SDG and
nationally determined contributions are essential as part of a strategy to meet funding needs,
such as generating innovative financing instruments, increasing access to global funding,
strengthening fiscal policy, or increasing the attractiveness of private investment [21,22].
SDGs issued by the United Nations emphasize the importance of environmental
sustainability that correlates well with human health and standards of living. Not only does
environmental pollution adversely affect human health and future generations but it also
causes climate change. Investments in sustainable energy and clean energy for low-carbon
economic development are widely considered prerequisites for creating environmental
sustainability. Figure 1 illustrates the larger position of sustainable finance and includes
the overall objectives of the SDGs. Sustainable financial instruments, such as green bonds,
can act as a bridge for a country to achieve SDGs.

Figure 1. Sustainable finance [23].

Figure 2 depicts how the various components of sustainable finance relate to one
another in an illustrative manner. Figure 2, which is presented in a slightly different
manner than Figure 1, places an emphasis on the participation of governance as an essential
component in order to create a sustainable ecosystem.

Figure 2. The components and dimensions of sustainable finance (Cambridge Institute Sustainability
Leadership, 2022 [24]).
Sustainability 2023, 15, 7877 5 of 18

The framework set out in the Paris Agreement and the SDGs can be utilized as an
appropriate parameter to mitigate and adapt to climate change in relation to sustainable
financing [23,24]. Through the SDGs and the Paris Agreement, the global framework now
leads to sustainable development that focuses on environmental protection and its relation
to financial mobilization. A moderately novel concept in financial and environmental
issues, sustainable finance, plays a crucial role in supporting the transition to a greener
transformation in both industrialized and developing nations [25].
This section aims to disclose how the review procedures and processes specific to our
research topic were performed. The objective of this research is to develop linguistic bridges
between the literature on sustainable finance and carbon trading. To address the limitations
of narrative reviews, this paper uses a systematic literature review to obtain all relevant and
available research on green finance and carbon trading [26]. A literature review is a research
synthesis conducted by review groups with specialized skills to identify, retrieve, appraise,
and synthesize a body of literature [27]. It follows a predefined and rigorous process to
ensure the reliability and reproducibility of the results. This literature review integrates
quantitative and qualitative evaluation through bibliometrics and content analysis.
The framework that was utilized for the approach is depicted in Figure 3. This
framework begins with the selection of the literature that is tailored to the search criteria,
followed by the quantitative and qualitative analysis of this literature, in order to arrive at
findings and conclusions.

Figure 3. Methodological framework.

2.1. Literature Retrieval and Selection

This paper adopted the preferred reporting items for systematic reviews and meta-
analyses (PRISMA) statement, published in 2009 and later updated in 2020 (referred to as
PRISMA 2020), for the selection of the retrieved literature. Although the PRISMA 2020
statement was designed for a systematic literature review of studies related to health
interventions, this method applies to other disciplines [28]. The following steps were
performed as suggested by PRISMA 2020 statements:
Sustainability 2023, 15, 7877 6 of 18

(1) Eligibility criteria

This step specified the studies’ inclusion and exclusion criteria and how we classified
them for the syntheses. There were three eligibility criteria for this study. First, the article
had to be written in English. This criterion ensures the maximum reach and impact of
research findings on the global community. Second, the article had to have been published
between 2014 and 2022. We opted for this timeline to discern the Paris Agreement’s impact
on the advancement of research related to green (sustainable) finance and carbon trading.
Third, the article had to be relevant to sustainable finance or carbon trading. This criterion
is critical as we attempted to identify linkages between the two concepts in research papers;
(2) Information sources
This step specified all sources (i.e., databases, registers, websites, organizations, ref-
erence lists and others) used to obtain the articles. It also specified the date when each
source was last searched or consulted. We utilized Scopus as the only source to ensure the
homogeneity of the articles’ quality. Scopus indexed 25,000 active journals or titles from
7000 publishers, meticulously reviewed and curated by an independent board. It utilizes a
rich underlying metadata architecture to connect authors, published ideas and institutions.
Furthermore, the Scopus database offers the feasibility and workability to explore sev-
eral fundamental keywords concurrently in an article title and abstract, thus enabling one
to locate the necessary word within the identified elements of a published paper/journal.
Therefore, we assessed it as an adequate representation of academic research publications.
The article queries were last conducted in July 2022;
(3) Search strategy
To obtain the documents/journals/papers that were required, we entered and regis-
tered keywords that appear in or resemble those in the article title, abstract, or keyword
lists. To avoid duplicating the document, the remaining or unused keywords in the title,
abstract, and keyword list were eliminated; for example, when the word “sustainable” was
searched for in titles, abstracts, and keywords, it excluded other keywords that may also
appear in the article title, abstract, or keyword lists.
We employed keywords related to carbon trading, banking, and green finance, e.g.,
carbon pricing, carbon trading, cap-and-trade, emission trading scheme, green finance,
and green banking. We limited the document search by date, document type, and subject.
Wildcards and Boolean operators were used, such as AND/OR, for example: carbon pric*”
OR “carbon tax*” OR “cap-and-trad*” AND “green financ*”. Furthermore, the literature
review method provided elements to distinguish the main characteristics of the research,
which would explore the following relevant topics: sustainable finance, green finance,
carbon trading, and emission trading;
(4) Selection process
The selection process specified the techniques used to determine whether an article
met the inclusion criteria, including how many reviewers sifted each search result, how the
reviewers worked in teams, and, if necessary, what automation tools were used. Figure 4
illustrates the selection process under eligibility criteria, information sources, and selection
criteria adopted by the graph from PRISMA [28]. We performed three rounds of queries
for each. The SCOPUS database identified a combined 506 articles. We removed duplicate
records by manual skimming. We did not use automation since the database is small and
manageable. We screened 494 articles based on titles and decided to retrieve all of them.
Based on our criteria, we removed 6 articles due to them having publication dates prior to
2014, 15 articles that were not written in English and 184 articles that were not relevant to
the research question. The total number of articles included for the bibliometrics analysis
was 289 articles.
Sustainability 2023, 15, 7877 7 of 18

Figure 4. Literature selection process (Source: PRISMA, 2020 [28]).

(5) Data collection process

Three independent reviewers assembled the needed information from the selected
articles using an extraction template. Any disagreement was resolved during our weekly
meetings with the researchers. The following data were intended to be extracted: first
author, country of study, publication year, source, methods, results and citation.

2.2. Quantitative Analysis

The data extracted from the previous step present a bibliometric analysis to broadly
explain what research has been performed on green (sustainable) finance and carbon trad-
ing. The data are presented in bar graphs and pie charts. Bibliometric indicators have
become some of the most common routine practice tools in evaluation research manage-
ment. We used article-level, author-level, and journal-level indicators for bibliometric
analysis. Article-level indicators measure the scope and impact of academic research at
the article level through alternative indicators or “surrogate indicators.” Due to the broad
use of the internet and information technology, article-level indicators are more relevant
in the digital environment. Author-level indicators help to track the impact of individual
Sustainability 2023, 15, 7877 8 of 18

researchers in the discipline. These indicators are traditionally calculated by using the
number of times other researchers cite their scholarly publications. Journal-level metrics
quantified the impact of a journal in a particular field. They calculate how many articles
are published per year and how many citations use articles published in that journal. The
data will be summarized in line and pie charts for visual aid.
The text mining software VOSviewer was adopted for science mapping. VOSviewer
is a comprehensive bibliometric analysis tool based on the visualization of similarities
(VOS) technology, which has unique advantages in clustering fragmented knowledge from
different domains according to their similarity and relatedness. In the visualized networks,
a node signifies a particular bibliographic item, such as an organization, country, keyword,
or reference. The node size represents the counting of the evaluated item, i.e., a citation or
occurrence. Links denote the co-citation, co-occurrence, or collaboration relationship. The
software automatically calculates the total link strength (TLS) metric to reflect the degree
of correlation between any two produced nodes. The greater the TLS value, the greater
the significance and centrality of the item. Nodes with a high degree of similarity were
clustered and were distinguishable from other clusters by color, whilst nodes with a low
degree of similarity were separated as much as feasible.

2.3. Qualitative Analysis

A qualitative analysis of the literature was also carried out. The study settings and
main findings were displayed using a table and a narrative summary. The main findings
were used in a thematic analysis to connect keywords identified from the SGDs indicator
framework. Thematic analysis is a type of qualitative data analysis technique. It can be
used to describe a group of writings (e.g., interview transcripts, documents, and studies).
The researcher carefully examines the data to identify common themes—ideas, topics, and
patterns that emerge frequently. Thematic analysis is a flexible qualitative analysis method
that enables us to garner new insights and concepts from non-numerical data. Because
thematic analysis is such a flexible method, there are many ways to interpret meaning from
the dataset, which can be biased without adherence to specific steps. There are six common
steps in conducting a thematic analysis:
(1) Familiarization
This stage entails going through the text to become immersed in and intimately familiar
with its substance. This stage was accomplished by reading through the articles and taking
preliminary notes to become acquainted with the qualitative data. It is the first and most
important step in carrying out a successful thematic analysis;
(2) Coding
This phase entails identifying significant broader patterns of meaning (potential
themes) by collecting and examining codes. We obtained the code from the process of
highlighting important phrases or sentences of the text and creating shorthand labels to
represent their content. We also gathered relevant data to assess the viability of each
candidate theme;
(3) Generating themes
This phase entails identifying themes, which are typically broader than codes. Several
codes can usually be combined into a single theme. We examined the codes we created
and looked for general themes. In this study, we also tried to match the themes with the
relevant goals of sustainable development;
(4) Reviewing themes
This phase involves comparing the candidate themes to the dataset to ensure that
they tell a convincing story about the data and answer the research question. Themes are
typically refined during this phase, which may include splitting, combining, or discarding
them. Our approach defined themes as a pattern of shared meaning underpinned by a
central concept or idea;
Sustainability 2023, 15, 7877 9 of 18

(5) Defining themes

This phase entails conducting a detailed analysis of each theme, determining the
scope and focus of each theme, and determining their ‘story’. It also entails selecting an
informative name for each theme;
(6) Narrating
This final phase involves weaving together the analytic narrative and data extracts
and contextualizing the analysis of the existing literature.

3. Results and Discussion

3.1. Chronological Publication Trend
Figure 5 shows the number of research papers published annually from 2014–2022
related to green finance and carbon trading. There is an exponential growth trend in the
number of publications each year; from only 1 article in 2014 to 131 articles in 2022. This
trend is expected to continue in 2023, as the number of published articles will rise by the
end of the year. It is evident that the financial market acceptance, public awareness, and
discussions of these issues are increasing. The topic is expected to become more popular as
the deadline for Sustainable Development Goals is approaching.

Figure 5. Publication trend by year.

As previously stated, the year 2014 was chosen due to the ratification of the Paris
Agreement. The Paris Agreement was the first-ever universal, legally binding global climate
change agreement, adopted at the Paris climate conference (COP21). Since then, research
on the topics of green finance and carbon trading has been significantly increasing year
by year. Green finance and carbon trading roles are essential for climate action. Therefore,
policy makers need to have a better understanding of how to effectively implement them.

3.2. Journal Allocation and Co-Citation Analysis

The 289 documents were published in 111 journals and 16 conference proceedings.
Figure 4 shows that the top 10 journals contributed 97 documents or 33.56% of the total
documents. Figure 6 also shows the impact factor of the journals based on the Journal
Citation Reports. We used CiteScore, calculated by Scopus in 2021, which is the number of
citations received by a journal in one year to documents published in the three previous
years, divided by the number of documents indexed in Scopus published in those same
Sustainability 2023, 15, 7877 10 of 18

three years. It can be deduced from a journal’s CiteScore that the articles it publishes have
a greater impact when the score is higher.

Sustainability (Switzerland) (CS = 5.0) 22

Environmental Science and Pollution Research (CS = 6.6) 20

Journal of Cleaner Production (CS = 15.8) 9

Journal of Sustainable Finance and Investment (CS = 4.5) 9

Business Strategy and the Environment (CS = 11.9) 7

Frontiers in Environmental Science (CS = 4.7) 6

Resources Policy (CS = 7.6) 6

Climate Policy (CS = 9.8) 6

Energies (CS = 5.0) 6

Renewable Energy (CS = 13.6) 6

0 10 20 30
Number of Publications

Figure 6. Rank of journals by publication number.

Figure 6. Rank of journals by publication number.

Sustainability published most of the articles related to green finance and carbon trading,
contributing 7.61% of the total articles. It is followed by Environment Science and Pollution
Research (6.92%), Journal of Cleaner Production (3.11%), Journal of Sustainable Finance and
Investment (3.11%), and Business Strategy and Environment (2.42%). Renewable Energy has
the highest CiteScore of 13.6, followed by Business Strategy and the Environment (CS = 11.98)
and Climate Policy (CS = 9.8).
It can be inferred that the research papers related to green finance and carbon trading
are not concentrated in a certain journal or field of study. Both are complex subjects that
require multidisciplinary and interdisciplinary approaches.

3.3. Countries/Organization Collaboration

Table 1 lists the countries that are actively participating in research on sustainable
(green) finance and carbon trading, the number of documents published, citations, and
total link strength (TLS). The minimum number of documents and citations per country
was set at 10. Of the 66 countries that have published papers on green finance and carbon
trading, only 10 of them meet the minimum threshold for documents and citations. China
published the highest number of publications and generated the most citations. These data
suggest the discussion on green finance and carbon trading is a worldwide concern, in both
emerging and developed countries.

Table 1. Summaries of countries’ contributions to research.

Country Documents Citations TLS

China 136 2214 77.00
India 22 239 19.00
Russia 21 102 7.00
Pakistan 20 565 33.00
Malaysia 18 430 27.00
United Kingdon 18 222 17.00
Vietnam 13 252 13.00
Germany 13 140 4.00
United States 12 157 15.00
Sustainability 2023, 15, 7877 11 of 18

Based on Figure 7, the global research of green finance and carbon trading is divided
into three clusters. The first cluster is dominated by European countries (United Kingdom,
Germany, and Italy) and the United States. The second cluster consists of India, Pakistan,
and Russia. China leads the third cluster with Malaysia and Vietnam. The map suggests
that the research collaboration between countries regarding green finance and carbon
trading is influenced by the region. China and Pakistan have collaborated with most
countries except for Germany.

Figure 7. Mapping of countries’ contributions to green finance/carbon trading research.

Regarding the organization or the authors’ affiliations, more than 90% of them only
published one research paper. There are five notable organizations that contributed to
the research of green finance and carbon trading based on their number of publications,
citations, and link strengths:
• School of Management and Economics, Beijing Institute of Technology, Beijing, 100081,
China. It has published 4 documents with 183 citations;
• School of Statistics and Applied Mathematics, Anhui University of Finance and Eco-
nomics, Bengbu, 233030, China. It has published 2 documents with 124 citations;
• Department of Economics and Finance, Sunway University Business School, Sunway
University, Subang Jaya, Malaysia. It has published 2 documents with 38 citations;
• School of Economics and Management, Huanghuai University, Zhumadian, 463000,
China. It has published 2 paper with 2 citations;
• School of Management and Economics, Beijing Institute of Technology, Beijing, 100081,
China. It has published 3 documents with 179 citations.
Sustainability 2023, 15, 7877 12 of 18

3.4. Influential Research

Table 2 shows the top 10 most cited research papers about green finance and carbon
trading. Almost all the articles were published in the last 5 years, except for 1 article, which
was published in 2016. The trend shows that the topic of green finance and carbon trading
has been gaining more traction in recent years.

Table 2. Publications with the highest impact.

Authors Title Year Journal Total Citations

A bibliometric analysis on green finance:
Zhang, D., Zhang, Z., Finance Research
Current status, development, and 2019 155
Managi, S. Letters
future directions
How does green finance affect green total
Lee, C.-C., Lee, C.-.C. 2022 Energy Economics 139
factor productivity? Evidence from China
Sustainable solutions for green financing
Taghizadeh-Hesary, F.,
and investment in renewable 2020 Energies 132
Yoshino, N.
energy projects
Demand for green finance: Resolving
Yu, C.-H., Wu, X., Zhang,
financing constraints on green innovation 2021 Energy Policy 130
D., Chen, S., Zhao, J.
in China
Can green financial development promote
He, L., Liu, R., Zhong, Z.,
renewable energy investment efficiency? A 2019 Renewable Energy 122
Wang, D., Xia, Y.
consideration of bank credit
Crowdfunding for renewable and Renewable and
Lam, P.T.I., Law, A.O.K. sustainable energy projects: An exploratory 2016 Sustainable Energy 115
case study approach Reviews
Evaluating green innovation and
Hsu, C.-C., Quang-Thanh,
performance of financial development: Environmental Science
N., Chien, F.S., Li, L., 2021 101
mediating concerns of and Pollution Research
Mohsin, M.
environmental regulation
Nexus between green finance and climate
change mitigation in N-11 and BRICS Environmental Science
Nawaz, M.A. et al. 2021 99
countries: empirical estimation through and Pollution Research
difference in differences (DID) approach
Impact of green credit on high-efficiency
Song, M., Xie, Q., Shen, Z. utilization of energy in China considering 2021 Energy Policy 98
environmental constraints

3.5. Keywords Co-Occurance Analysis

Figure 8 shows all the author keywords from the published documents. A total of
118 author keywords are clustered into 15 groups. ‘Green finance’ is the common denomina-
tor in all the clusters, with 142 occurrences, 94 links, and a total link strength of 274. Author
keywords that are often associated with ‘green finance’ (indicated by their link strength)
are ‘sustainable development’, ‘China’, ‘climate change’, and ‘green bonds’. ‘Green finance’
and ‘sustainable development’ most often co-occur, with a link strength of 20. This result
is to be expected, as the purpose of green finance stated in the UN Environment Program
aims to increase the financial flows to the sustainable development priorities. Meanwhile,
the least explored linkages with green finance are technology and innovation.
‘Green finance’ is classified in Cluster 6, along with ‘banking system’, ‘central banking’,
‘climate change’, ‘COVID-19′ , ‘financial stability’, ‘green energy’, ‘green recovery’, and
‘Paris agreement’. It is suggested that the role of green finance in the economic recovery
post-pandemic is an emerging research topic in recent years.
Figure 9 shows all of the author keywords that are linked with ‘carbon trading’. It
shows that there are documents linking ‘green finance’ with ‘carbon trading’, but they are
far less explored compared to other themes. Figure 9 suggests the term ‘green finance’ is
uncommonly used to define the financial aspects of carbon trading. The more common
terminology is ‘climate finance’, which is defined by UNFCCC as local, national or transna-
Sustainability 2023, 15, 7877 13 of 18

tional financing—drawn from public, private and alternative sources of financing—which

seeks to support mitigation and adaptation actions that will address climate change.

Figure 8. Mapping of author keywords for green finance/carbon trading research.

Figure 9. Linkage between ‘carbon trading’ and ‘green finance’ author keywords.
Figure 9. Linkage between ‘carbon trading’ and ‘green finance’ author keywords.
Sustainability 2023, 15, 7877 14 of 18

4. Discussion
Our study covers the theoretical underpinnings of the topic determined from the
results and literature evaluation of sample studies. Additionally, it provides a list of the
current research trends, as well as possible topics of research that could be investigated in
the future. Our current research examines the publications that highlight the involvement
of green finance towards carbon trading and carbon emission reduction by employing an
integrative review, which comprises a bibliometric analysis and manual literature review
of a sample of 184 relevant articles. This review is carried out in order to implement an
integrative review. The results of the bibliometric show the interesting fact that only a
few documents or journals discussed and explored the implementation of green finance
in carbon trading. The literature review performed unveils a substantial finding on the
importance of sustainable finance or climate finance with respect to its involvement to
support carbon emission reduction. Based on the analysis conducted by Claudius and Betz
(2018), the EU Transaction Log data reveal that it is more suitable to associate extended
organizations with long trading knowledge and practices with the financial services sector,
including banking [5]. In executing carbon trading, financial institutions can play the follow-
ing roles: (a) Acting as intermediary institutions in carbon trading transactions with broker
specialization; (b) Offering additional services by managing accounts directly; (c) Providing
relevant market information to customers through the publication of newspapers or market
analysis reports; (d) Acting as a market maker by continuously carrying out supply and
demand on the exchange in a particular price corridor; (e) Making transactions through a
company’s account to acquire profit; (f) Borrowing a company’s quota and returning it at
interest (using it as speculative capital); (g) Assisting in exchanging carbon quotas with
certified emission reductions (CERs) or emission reduction units (ERUs) by selling carbon
quotas and buying CERs/ERUs annually; (h) Acting as an aggregator by collecting the
excess quota of customers and selling it on the market; (i) Becoming the leading hedging
partner in which the bank has a role in developing and offering derivative products to
manage price risk for regulated companies.
In general, the theory of emission trading focuses on the trading activities of regulated
organizations. In reality, however, non-regulated entities also actively participate in the
emission allowances market. They frequently serve as intermediaries and can enhance
market efficiency by reducing transaction costs [29]. In our bibliometric analysis and
systematic literature review, we observed that the role of the financial sector in commodity
markets in general and in emissions trading in particular is underexplored, and there
appears to be a lack of research into the roles that banks play in these markets. In order
to better comprehend the significance of financial institutions (such as banks) involved in
EU emission trading, particularly as trading partners of companies governed by current
emission trading schemes, we consider it necessary to conduct a survey analysis.
The carbon market is a compliance market in which the original seller or issuer of the
product is the government (i.e., carbon allowances). Therefore, the market lacks typical
sellers who would act as counterparties for buyers seeking to hedge against the rising
prices of allowances [30].
According to the several studies that have been reviewed, there are findings that imply
that financial development plays a fundamental role in the mitigation of emissions. In
theory, financial function and its development include capitalization, the involvement of
technology, and implementation of regulations with respect to environmental protection
and earning/generation of value and income. That said, with some assistance from more
developed countries that have attained high financial development to improve environ-
mental performance, it is expected that other developing countries would be benefited by
policymakers as a reminder of how important it is to take into consideration financial as-
pects and their development to protect the environment for both developed and developing
nations [31,32]. In addition, Geddes et al. (2020) also implied that the role of government
in executing the financial policy is crucial [33]. Furthermore, Wang, Y and Zhi, Q (2016)
emphasized that the concept of green finance is still at the theoretical level, and therefore, it
Sustainability 2023, 15, 7877 15 of 18

is essential for researchers to explore more and analyze how to reduce environmental risks
through more sustainable financing by refining existing traditional financing mechanisms
and supporting the development of the renewable energy industry [34].
We further noticed that there are several challenges and opportunities to improve
financial sustainability and highlight the already attained actions. Marx (2020) affirms
that managing the obstacles demands an influential political will, with an engagement
plan that will be performed [35]. In this case, proper coordination is required at both the
global and regional levels, such as a centralized distribution system on an environmentally
sustainable economic movement, the so-called taxonomy. Based on some studies we have
examined [36–38], we have summarized the following conditions that are also imperative
to bring about: (i) Regulations that acknowledge the association of sustainable investments
and sustainability risks, including the disclosure of how institutions and the government
combine environmental, social, and governance factors in their risk management process;
(ii) Public and private businesses and funding are highly required; (iii) Multidisciplinary
experts to solve the complicated dilemmas of climate change, but also poverty and other
SDGs; and (iv) A competitive market to guarantee efficient resource allocation would also
be imperative for thriving carbon trading actions [36–38].
We specifically note that in formulating policies related to carbon trading mechanisms,
governments must determine appropriate and targeted criteria to provide necessary carbon
“credits” to companies that acquire these emissions. This mechanism requires account-
ability and transparency, including disclosing information from governments on which
companies or industry players are releasing carbon emissions and detailed transaction
figures. Accountability and transparency will prevent the possibility of under-the-table
transactions between government actors and companies that release carbon emissions.
With a better future projection of carbon trading or a carbon market, clear and straight
regulations that can underlie and support its implementation are required. It is also possible
for the government to become involved by enacting policies that evaluate the corporation’s
financial and operational requirements and encourage green and sustainable investments
in emission reduction measures. For instance, governments might take into consideration
putting in place systems for carbon trading (and/or carbon taxes). This may increase aware-
ness among investors, lenders, and financial service providers for market segmentation,
and it may also assist in flexible implementation by financial institutions and investors,
thereby keeping policy risks (such as stricter environmental policy) relatively low, and
making green investments attractive to a wider range of stakeholders [39].

5. Conclusions and Policy Implications

Using a bibliometric methodology, this study attempts to describe and assess the
current status and trajectory of the development of academic research on the topic of green
finance in its association with carbon trading (or the carbon market). The sustainable ecolog-
ical and environmental development has become a vital objective of green finance. Green
finance is a powerful component for carbon emission reduction and other environmentally
friendly projects. Based on the paper generated in the system, most studies examine the
relationship between green finance and carbon dioxide (CO2 ) emissions that support green
finance or the impact of green finance can be reflected in CO2 emission reduction.; however,
there is no specific analysis of the impact and/or correlation of green finance or sustainable
finance on carbon trading transactions.
However, there are some open analyses or opinion in the media showing that there
might be several correlations between carbon trading (cap-and-trade) transactions and
green finance. First, green finance intends to raise awareness, share knowledge and other
ideas that can facilitate and increase participation in various carbon market developments.
Second, green finance involves government-enforced programs around carbon compliance
and how private industry responds to these mandates. Third, green finance requires a
functioning voluntary carbon market, which allows financial institutions to provide green
bonds or loans for green projects and governments to provide tax incentives. Hence,
Sustainability 2023, 15, 7877 16 of 18

further research is required to justify the validity of the opinion. Through this study, it
is anticipated that both private institutions that provide the market for the green finance
industry and institutions that regulate the governance of the market in a broader context
of the creation of economic sustainability and environmental protection will gain a better
understanding of the condition of a number of countries engaging in carbon trading and
its green finance policy. With clear information advantages, more opportunities will be
provided to researchers and it is anticipated that the international collaboration between
developing and developed nations will increase. This study will also be of great use to
a number of stakeholders directly involved in the implementation of green finance and
carbon trading policies, as it will present potential findings regarding the development
of research on green finance and carbon trading. Despite the fact that the quality of the
articles has been ensured, the quantity of papers is relatively moderate. This is a limitation
of the study that exists due to the fact that the majority of the articles selected for analysis
are derived from the Scopus database. By conducting a manual search on the website, we
were able to locate a number of useful articles originating from different databases other
than Scopus. As a result, making use of multiple databases is something that could be
carried out to make the results more representative for future research.

Author Contributions: Conceptualization, D.P.S.M. and I.M.; methodology, D.P.S.M.; software,

D.P.S.M.; validation, D.P.S.M., T.Y.M.Z., T.E.B.S. and I.M.; formal analysis, D.P.S.M. and I.M.; investiga-
tion, D.P.S.M. and T.Y.M.Z.; resources, D.P.S.M.; data curation, D.P.S.M. and T.E.B.S.; writing—original
draft preparation, D.P.S.M.; writing—review and editing, D.P.S.M., T.Y.M.Z., T.E.B.S. and I.M.; visu-
alization, D.P.S.M.; supervision, T.Y.M.Z. and T.E.B.S.; project administration, D.P.S.M. All authors
have read and agreed to the published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: The data presented in this study are available on request from corre-
sponding authors.
Acknowledgments: We would like to thank the following knowledgeable people for helping to
improve the content of this paper. Amy Myers Jaffe, the Faculty Affiliate of the Fletcher School,
Tufts University, and Luky A. Yusgiantoro, the Senior Advisor of Purnomo Yusgiantoro Center, who
have provided us with substantial input for this article. We have also greatly benefited from the
enhancements of the writing structures by Robert Greaves of Dentons HPRP, Indonesia.
Conflicts of Interest: The authors declare no conflict of interest.

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