ЗЕЛЕНЕ ФІНАНСУВАННЯ ЯК ДРАЙВЕР СТАЛОГО РОЗВИТКУ РЕГІОНІВ, GREEN FINANCE AS DRIVERS OF REGIONAL SUSTAINABLE DEVELOPMENT

<jats:p>Introduction. Meeting the Paris Agreement targets requires both an unprecedented mobilization of capital and a rethinking of the level of government at which environmental decisions are made and financed. The literature on green finance and the theory of fiscal federalism have largely developed in parallel, leaving the interaction between the volume of green capital and the decentralization of environmental governance theoretically underexplored. This gap is critical because, according to the OECD, subnational governments account for roughly 40% of public expenditure, 55% of public investment, and 60% of climate-significant spending, meaning that a large share of the green transition must physically pass through the local level. The purpose of the article is to establish the theoretical models and mechanisms of interaction between green finance and environmental (fiscal) decentralization as drivers of regional sustainable development, grounded in the theory of fiscal federalism, and to identify the boundary conditions under which this interaction holds across different institutional settings. Methods. The study relies on a theoretical-analytical synthesis of fiscal federalism theory (Oates' decentralization theorem, the concept of environmental federalism) and on a comparative analysis of verified statistics at three levels – global, European, and national (Ukraine) – with a dedicated comparative block on emerging markets and developing economies (EMDE). The evidentiary base consists of primary sources: IEA, OECD, UNCTAD, Climate Bonds Initiative, the IFC-Amundi joint report, and the European Commission. Results. Two opposing channels through which decentralization affects the environment are systematized: a positive informational-innovation channel and a negative "race to the bottom" channel. Green finance is shown to act as the mechanism that activates the former and neutralizes the latter. A substantial positive association is confirmed for the OECD (a 10% increase in green finance is associated with a ~7.98% reduction in the ecological footprint), yet the comparative EMDE analysis reveals a potential reversal of the effect's sign under weak institutions and insufficient financial resources: cumulative EMDE GSSS bond issuance in 2018–2024 reached only ~USD 800 bn (~16% of the global total), of which Asia excluding China accounts for merely 12%. Conclusions. Green finance and environmental decentralization are complementary drivers of sustainable development only when two boundary conditions are met – adequate financial provisioning and sufficient institutional quality. Beyond these thresholds (most EMDE, wartime Ukraine), the effect is indeterminate and potentially negative. The findings imply that transplanting the "decentralization plus green finance" recipe without building institutional capacity may fail.  </jats:p>