Assessing Progress Toward SDG 7: A Threshold Analysis of Environmental Policy Stringency and Institutional Quality on Renewable Energy Consumption

ABSTRACT As we approach 2030, assessing the progress of sustainable development goals (SDGs) has become more imperative than ever. This study focuses on assessing the progress of SDG 7, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all. Achieving SDG 7 requires a dual strategy by strengthening environmental policy design and enhancing institutional frameworks to ensure credible, consistent, and enforceable implementation. We empirically test this proposition by investigating the nonlinear impact of environmental policy stringency and institutional quality on renewable energy consumption for OECD and non‐OECD countries from 2015 to 2020. Using dynamic panel data threshold regression, we find that environmental policy stringency and institutional quality have threshold effects on renewable energy consumption. Specifically, surpassing the thresholds of 1.50 for aggregate and 0.50 for market‐based environmental policy stringency leads to increases in renewable energy consumption by 8.6% and 12.2%, respectively. Moreover, aggregate environmental policy stringency increases renewable energy consumption from 7.5% to 15.1% at high thresholds of institutional quality. Disaggregated analysis further reveals that market‐based instruments exert stronger effects, ranging from 8.6% to 23.4%, compared to nonmarket‐based instruments, which show more moderate effects of about 6.2%–9.8%, at upper thresholds of institutional quality. These findings suggest that while progress toward SDG 7 is underway, it remains conditional on surpassing critical policy and institutional thresholds. To accelerate the energy transition, policymakers must prioritize the adoption of market‐based environmental instruments and invest in strengthening institutional quality to ensure the effective design and enforcement of clean energy policies.