Governance Quality and Renewable Energy Transition: Global Evidence Using Panel ARDL

This study analyses the long-run relationship between governance quality and renewable energy development using a global panel of 174 countries over the period 2000–2023. The objective is to assess whether institutional quality systematically influences renewable energy deployment across heterogeneous development contexts. The empirical analysis employs a panel autoregressive distributed lag (PMG-ARDL) framework, which accommodates mixed integration orders and allows for heterogeneous short-run dynamics while imposing homogeneity on long-run coefficients. Renewable energy consumption, measured as the share of renewable energy in total final energy consumption, is modelled as a function of governance quality indicators, economic development, and environmental pressure, with trade openness and foreign direct investment included as control variables. Panel unit root tests indicate a mixture of I(0) and I(1) variables, supporting the use of the ARDL framework, while panel cointegration tests provide strong evidence of a stable long-run relationship in the estimated model. The results reveal a statistically significant long-run association between governance quality and renewable energy development, although the magnitude and direction of the effects vary across governance dimensions and development levels. In contrast, short-run effects are generally weak, suggesting that governance primarily shapes renewable energy outcomes through gradual, structural channels. These findings highlight the importance of institutional quality for long-term energy transition processes and provide empirically grounded insights for the design of energy and governance policies. The analysis reveals significant heterogeneity across development contexts: governance improvements yield positive effects on renewable energy adoption in low-income countries (β = +3.77), where institutional deficits constitute binding constraints, whilst the effect becomes negative in high-income economies (β = −11.87), reflecting diminishing returns and infrastructure lock-in. These findings suggest that developing countries should prioritise governance reforms—particularly Regulatory Quality and Political Stability—to accelerate energy transitions, whereas advanced economies should shift policy attention toward grid modernisation and market design. International organisations should adopt differentiated climate finance strategies matching institutional support to the development stage.