Renewable energy policy, renewable energy consumption and economic growth: The moderating role of governance quality

Abstract

Transitioning to clean and affordable renewable energy consumption is one of the Sustainable Development Goals (SDGs) set by the United Nations (UN) in 2015. However, the evidence regarding the effectiveness of implementing renewable energy policies is mixed across countries. The purpose of this study is to explore how governance quality can explain cross-country heterogeneities and moderate the associations between renewable energy policies, renewable energy consumption, and economic growth. The study adopts a quantitative research design and the method of panel regression analysis based on the Two-step System Generalized Method of Moments. The research examines a sample of 140 countries, which constitute more than 70% of the total population of countries, during the period from 2010 to 2021. The period is determined by data availability. The results reveal a significant positive effect of renewable energy consumption and renewable energy policies on Gross Domestic Product (GDP). Furthermore, the findings confirm the positive moderating effect of governance quality on the relationship between renewable energy policies and economic growth. This study contributes both theoretically and managerially to the exogenous growth model by highlighting the importance of renewable energy policies and governance quality in fostering economic growth.