Nonlinear Effects of Renewable Energy Integration on Sustainable Development in OECD Countries

ABSTRACT This paper examines the nonlinear relationship between the green quality of the energy mix and sustainable development in 35 OECD countries from 1995 to 2022. Unlike conventional renewable‐energy shares, the Green Quality Index (GQI) is an emissions‐weighted indicator that accounts for differences in the carbon intensity of energy sources and captures the environmental quality of the overall energy portfolio. We employ the cross‐sectionally augmented autoregressive distributed lag model, multinomial logit analysis, and panel threshold regression to estimate long‐run, regime‐dependent, and nonlinear relationships. The results show that higher GQI is positively associated with sustainable development in the long run and increases the likelihood of membership in the high‐sustainability regime relative to the low‐sustainability regime. Its association with the medium‐sustainability regime is positive but statistically insignificant. The threshold analysis identifies an estimated GQI boundary of 0.673. Below this threshold, GQI is positively and significantly associated with sustainable development; above it, the point estimate remains positive but is statistically insignificant. Economic growth exhibits a U‐shaped relationship with sustainable development, while stronger legal frameworks supporting women's economic participation generally improve sustainability outcomes. These findings show that the relationship between energy‐mix quality and sustainable development varies across stages of the green transition.