Examining the moderating effect of institutional governance on the nexus between green energy and environment sustainability

Attaining environmental sustainability has become a global issue due to increasing emissions, climate change and biodiversity loss. Due to increase in industrial activities and economic expansion, it becomes important for these economies to cut down emissions, shift towards green energy and achieve sustainability. Therefore, the current study aims to investigate how institutional governance moderates the impact of green energy transition on environmental sustainability, along with green technology innovation, GDP, energy intensity, FDI and trade openness. A comprehensive measure i.e. Load Capacity Factor has been used utilized as a proxy to measure the environmental sustainability as it captures both the demand and supply sides of the economy. The study has employed Cross-Sectional Augmented Autoregressive Distributed Lag modelling approach for the panel data of 25 emerging and developing nations from 2000 to 2021 and for robustness, GMM and FMOLS econometric techniques have been utilized. All the pre-estimations have been done before applying the final model. The results indicate that green energy shows a positive and significant impact on load capacity factor while the institutional quality shows a negative but significant impact. But the interaction variable i.e. Green Energy* Institutional Governance reveals a positive and significant impact on load capacity factor, thereby enhances environmental sustainability and strengthens the relationship between them. Green technology innovation indicates a positive impact on load capacity factor. GDP, energy intensity, FDI and trade openness shows a negative and significant impact on load capacity factor, indicating environmental deterioration. The study has highlighted the importance of institutional governance in moderating the relationship between green energy transition and load capacity factor. The outcomes offer some essential policy recommendations, emphasizing the need to integrate institutional frameworks with energy sector by expanding renewable energy infrastructure and incentivize the transition from fossil fuels to clean energy sources through subsidies and supportive regulatory frameworks. Strengthening institutional quality is not merely a political goal it can help achieve environmental goals also by allocating investments towards more green projects and enacting laws that encourage the development towards sustainable practices. This will create better pathways for sustainable innovations and achieving environmental sustainability.