Unraveling the impact of non-renewable energy, green innovation and institutional quality on economic welfare in Türkiye

Purpose This study examines the impact of non-renewable energy consumption, green innovation and institutional quality on economic welfare in Türkiye, using data from 1990 to 2021. Design/methodology/approach The dynamic autoregressive distributed lag (DARDL) model is employed for the analysis. Additionally, the frequency domain causality (FDC) is used to assess the direction of causality and check the robustness of the study. Economic welfare is measured using principal component analysis (PCA). Findings The results indicate that non-renewable energy positively affects economic welfare in the short run and long run, although only the long-run effect is statistically significant. Similarly, green innovation significantly promotes economic welfare in the long run, but its short-run impact is statistically insignificant. Conversely, institutional quality has a detrimental effect on economic welfare, exhibiting a negative and significant impact in the short and long run. The FDC test results reveal that all variables Granger-cause economic welfare, with a unidirectional causality between non-renewable energy, institutional quality and economic welfare. However, a bidirectional causal relationship exists between green innovation and economic welfare. Practical implications The study provides policymakers with insights into balancing energy use, green innovation and institutional quality for sustainable welfare. Accordingly, policymakers in Türkiye should prioritize green patents. In addition, reducing the permit-process time for renewable energy projects is imperative to incentivize investors, while ensuring institutional reforms are aligned with sound macroeconomic policies for sustainable welfare. Originality/value This is the first study to simultaneously analyze the effect of non-renewable energy, green innovation and institutional quality on economic welfare in Türkiye.