Governance and Green Energy: Unveiling Their Impact on Sustainable Development in OECD Countries

Abstract

This study focuses on the impact of renewable energy adoption on the sustainable development of OECD countries and how country-level governance can influence this relationship. Using OECD data from the World Bank database for the period 2000–2021, our findings indicate that, while renewable energy adoption is generally linked to higher sustainable development goals, its effectiveness diminishes in countries with stronger governance. These findings remain consistent across the various robustness checks. Using cross-sectional analyses, we further show that the impact of renewable energy adoption on sustainable development is more pronounced in countries with common law legal systems, in the post-Paris Agreement period, and in countries with higher economic development. However, the results on the moderating role of country-level governance on the association between renewable energy and sustainable goals vary significantly across countries based on the factors of heterogeneity. Thus, our findings indicate that balanced governance can encourage countries to harness the beneficial effects of adopting renewable energy, promote sustainable development, and address climate change challenges.