Driving sustainable development: The role of renewable energy, climate policy uncertainty, and productive capacity components

Achieving sustainable development requires understanding the complex drivers that operate across environmental, economic, and social domains. This research investigates the heterogeneous impacts of renewable energy, productive capacity components, and climate policy uncertainty on sustainable development. Analyzing a global panel of 140 countries (49 developed, 91 developing) from 2000 to 2021, it employs an instrumental variable quantile regression to capture differential effects across the distribution of sustainable development. The findings reveal a nuanced impact of renewable energy. For the full sample and for developed nations, renewable energy exhibits a consistently positive and statistically significant effect across all quantiles. In developing countries, however, the relationship is quantile-dependent: the impact is significantly negative for nations at the lower quantiles of sustainability but becomes positive for more advanced developing nations at the upper quantiles. Climate policy uncertainty has a universally negative effect, acting as a major barrier to green investment worldwide, with the most acute effects felt in the developing world. In contrast, human capital and ICT emerge as robust, universal pillars, demonstrating a consistently positive impact. The effects of natural capital are dualistic, following a curse-to-blessing trajectory, its impact shifts from significantly negative in less sustainable nations to positive in sustainability leaders. Structural change is a powerful, positive driver in all contexts. Meanwhile, the influence of institutions is a critical catalyst for progress at low-to-median development levels, though it exhibits diminishing returns for advanced nations. The private sector's impact is generally negative but turns positive in the most advanced developing countries. Also, the effect of transport is negative in most quantiles.