Threshold and Synergetic Effects of Green Finance, Environmental Taxation, and Peace on the Renewable Energy Transition

This research aims to examine the nonlinear and synergistic effects of Global Peace Index (GPI), green finance (GF), and environmental taxation (ET) on the renewable energy transition (RET) in a sample of 86 countries from 2002 to 2022. A two-stage empirical strategy is employed. First, a panel threshold regression (PTR) model identifies critical thresholds for GPI, GF, and ET. Second, a Common Correlated Effects Mean Group (CCE-MG) estimator is employed to address cross-sectional dependence and estimate regime-specific effects. The results reveal that the effects of Gross Domestic Product (GDP) and greenhouse gas emissions (GHG) on RET are unstable and exhibit “regime-switching” behaviour, conditional on the thresholds of GPI, GF, and ET. Their influence reverses, weakens, or becomes insignificant depending on institutional settings. Importantly, the full benefits of GDP and GHG on RET materialise only when peace, green finance, and environmental fiscal policies are simultaneously present, highlighting a strong institutional synergy. Additionally, control variables such as institutional quality (IQ) and foreign direct investment (FDI) consistently promote renewable energy consumption across all regimes and model specifications. The results are reassuringly robust to alternative measures of threshold variables and an alternative estimator based on Driscoll–Kraay standard errors. This research contributes to the growing literature on renewable energy adoption and offers novel insights for designing integrated, context-sensitive climate and energy policies adaptable to a wide range of economic and institutional contexts.