This comprehensive article investigates the pivotal role of green finance in advancing sustainability within the European Union (EU), aligning with its ambitious climate neutrality goals under the European Green Deal. Employing a systematic literature review and synthesis approach, the study examines diverse green finance instruments, the evolution of EU policy and regulatory frameworks, and the documented environmental and economic impacts of green investments. Special attention is given to analyzing empirical findings, including trends in green bond issuance, environmental protection expenditure, environmental tax revenues, and fossil fuel subsidies across Germany and the broader EU, and their respective impacts on greenhouse gas emissions. While green finance demonstrably correlates with positive sustainability outcomes, the analysis reveals persistent challenges such as the "Green Paradox" and the counterproductive effects of fossil fuel subsidies and certain environmental expenditures in specific regions. The findings underscore the imperative for nuanced policy design, robust regulatory enforcement, and a holistic approach that integrates socio-economic considerations to maximize the effectiveness of green finance in fostering a low-carbon, resilient, and sustainable European economy.
Bianchi et al. (Sat,) studied this question.