Energy Transition and Institutional Quality in E-7 Economies: Unveiling Paths to Sustainable Development with CS-ARDL Analysis

The impact of energy consumption on sustainable development remains a critical global concern that is deeply influenced by the progress and effectiveness of the ongoing energy transition. The primary objective of this study is to examine the impact of the energy transition (ET) an institutional quality index (IQI) on sustainable development (SD), along with other control variables, including globalization (GLOB), trade openness (TO), gross domestic product per capita (GDP), and economic structure (EcoStru), in E-7 economies from 1990 to 2022. To fulfill this objective, we employ the cross-sectional autoregressive distributive lags (CS-ARDL) technique to tackle issues such as heteroscedasticity, cross-sectional dependence, and interaction across sections caused by variations in slope. Similarly, for the robustness analysis and based on the results of cointegration tests, we employed the Fully Modified Ordinary Least Square (FMOLS) and Canonical Cointegrating Regression (CCR) cointegration models. The empirical findings reveal that the ET, TO, and IQI significantly influence improving sustainable development in the E-7 countries. Meanwhile, GLOB and GDP have been shown to have a detrimental environmental impact. To move toward truly sustainable development, E-7 countries should emphasize the transition to renewable energy and reinforce institutional governance to lessen their dependence on fossil fuels.