How Renewable Energy, Environmental Policy Stringency, Trade Diversification Index, Impact Environmental Sustainability in G‐7 Nations

ABSTRACT Ecological sustainability requires an understanding of the importance of natural resources (NAT), trade diversification (TRD), and the environment. We can develop methods to reduce the damaging environmental effects in developed and developing economies while promoting sustainable economic models. Therefore, this work analyzes the impact of TRD, NAT, renewable energy (RE), environmental stringent policy (EPS), and GDP on the load capacity factor (LCF) of G‐7 countries. For this purpose, the annual data of 1995–2022 is analyzed. The results of Method of Moments Quantile Regression (MMQR) show that NAT, RE, and TRD index are enhancing environmental quality, whereas EPS and GDP are harmful for the environment. MMQR is used to get coefficient values. On the other hand, TRD, the use of RE, and strict environmental laws lower the bad consequences of industrialization in the G‐7 countries. Evidently, whereas the influence of EPS is waning on the quantiles of LCF, the impact of TRD is rising. To verify the impacts of EPS on LCF, this work performs wavelet analysis on country specific data, and it is validated that EPS is arming the environmental quality. Policymakers should also impose strict measures gradually, giving firms time to adjust. This shift can be facilitated by offering green technology financial support and subsidies. The work offers practical solutions for maintaining the G‐7 region's environmental quality.