CAN STRONG INSTITUTIONS STEER THE ENERGY TRANSITION TO SAFER SHORES? UNPACKING THE FINANCIAL AND RENEWABLE CHANNELS

Understanding the risks inherent in energy system transitions is critical for informed decision-making, enabling the development of sustainable, efficient and ecologically balanced energy frameworks. This study examines the relationship between institutional quality and global energy transition risks using a comprehensive panel of 96 economies, employing both linear and nonlinear modeling approaches. The results demonstrate that robust institutional frameworks are pivotal in reducing energy transition risks. The nonlinear estimates uncover that, however, the mitigating effect of institutional quality weakens beyond a certain threshold of financial development. Conversely, institutional efficacy in risk reduction is amplified only when renewable energy adoption surpasses an estimated threshold. These findings underscore the indispensable role of governance in facilitating a smooth energy transition and provide actionable insights for policymakers seeking to navigate the complexities of global energy transformation.