Energy-institutional stability-economic growth nexus is modeled by Cobb Douglas function.
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Energy-institutional stability-environmental quality nexus is modeled by Diet and Rosa function.
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Both, REC and NREC contributes to economic growth and pollution.
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Institutional quality declines environmental pollution and spur economic growth.
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Focus on institutional quality and renewable energy technologies is suggested to achieve SDGs.
Abstract
The anthropogenic impact of conventional energy sources encourages the utilization of renewable energy, as it has become a strategic commodity for economic growth. On the other hand, institutional stability is the pre-requisite without which environmental quality cannot be assured and the economy cannot function. However, in recent literature, very little consideration has been given to this important phenomenon. This study is set to analyze the energy-institutional stability-economic growth nexus, as well as the energy-institutional stability-environmental quality nexus, by incorporating the Cobb Douglas production function and the Diet and Rosa environmental function respectively. The sample consists of the D-8 countries and the time period spans 1990 to 2016. To analyze the developed models, Autoregressive Distributive Lag (ARDL), Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) tests are applied, along with other econometric techniques. The panel ARDL statistics indicate significant cointegration among all variables of both functions, while the FMOLS test reveals that consumption of both nonrenewable and renewable energy has a positive impact on economic growth, as well as on environmental degradation. Further, results indicate that institutional stability is crucial for establishing a nation on a sound footing and protecting environmental quality. Based on these results, the study suggests a blend of both types of energy and a gradual transition toward renewable energy sources, with better implementation of policies and technological advances, to produce, preserve, and transmit renewable energy production.
