Abstract: This paper aims to examine the impact of green loans on $$CO_2$$ reduction for a group of SMEs in Albania. The dataset on loan beneficiaries was collected from one credit guarantee scheme that encourages banks to provide access to financing for businesses on a sustainable basis. The credit guarantee scheme has a special window for green loans to support greenhouse gas (GHG) reduction projects in Albania through a risk-sharing guarantee mechanism. The SMEs examined in this study have been financed from five different banks in the period 2019-2024. We analyze the measures of $$CO_2$$ emission before and after the new investments using a multiple linear regression model to assess the relationship between $$CO_2$$ savings and key financial and loan-related variables. Overall, the results suggest that higher loan amounts are significantly associated with greater $$CO_2$$ savings, indicating that increased financial support enhances the effectiveness of green investments. Loan maturity also shows a positive, though modest, effect on emission reductions, while higher interest rates negatively impact $$CO_2$$ savings, implying that elevated borrowing costs may discourage environmentally beneficial projects. Surprisingly, total investment costs exhibit a negative correlation with $$CO_2$$ savings, possibly reflecting inefficiencies in resource allocation. The approach and findings provide valuable insights for policymakers and enrich the existing literature, laying the groundwork for future research.

Keywords: Green Loans, Energy efficiency, CO2 reduction, Credit Guarantee Scheme, Albania, Small and Medium Enterprises

Pages: 179-189