When Do Innovation and Renewable Energy Transition Drive Environmental Sustainability?
Abstract
1. Introduction
2. Literature Review and Hypothesis Development
2.1. Environmental Innovation and Renewable Transition for Environmental Performance
2.2. The Role of Green Finance
2.3. The Role of Environmental Governance
3. Methodology and Data
4. Results
4.1. Direct Effects
4.2. Transmission Mechanisms
5. Discussion
6. Conclusions and Policy Implications
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Acknowledgments
Conflicts of Interest
References
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Variables | Unit of Measurement | Sources | Summary Statistics | |||
---|---|---|---|---|---|---|
Mean | Std. Dev. | Min | Max | |||
Environmental Performance | Load Capacity Factor (Biocapacity/ecological footprint) | The authors’ calculation using data from GFN | 2.654 | 6.077 | 0.002 | 48.159 |
Environmental Performance Index | GFN | 74.264 | 5.024 | 66.070 | 88.200 | |
Renewable energy transition | Measured as the share of renewable energy consumption in global energy consumption | WDI | 11.332 | 6.051 | 0.900 | 23.900 |
Environmental innovation | Total number of patents in environment-related technologies | OECD | 26.963 | 6.239 | 16.860 | 45.400 |
Green finance | GF1: The aggregate green bond issuance (USD billion) is split between corporate and sovereign entities within each country | IMF Climate database | 13.318 | 22.030 | 0.014 | 94.593 |
GF2: Environment protection expenditure (% of GDP) | IMF | 0.850 | 0.196 | 0.509 | 1.377 | |
Environmental governance | Environmental Policy Stringency Index (EPSI) | OECD | 3.087 | 0.720 | 1.222 | 4.889 |
Environmental legislation is measured as the number of new national climate change legislations enacted in a particular year | FAOLEX | 0.812 | 1.219 | 0 | 7 | |
Economic growth | GDP per capita (US dollars) | WDI | 42,595.936 | 7619.873 | 27,618.942 | 71,318.307 |
Population growth | Annual population growth | WDI | 0.441 | 0.500 | −1.845 | 1.462 |
Political stability | Measured as the likelihood of a government being destabilized by unconstitutional or violent means, including terrorism and domestic violence (percentile rank) | WDI | 67.789 | 12.731 | 37.379 | 94.286 |
Cross-Sectional Dependence | Slope Homogeneity | ||||||
---|---|---|---|---|---|---|---|
Test | Statistic | p-Value | Test | Statistic | p-Value | ||
RET Model | Model 1 | LMadj | 7.048 | 0.000 | 9.389 | 0.000 | |
adj | 16.022 | 0.000 | |||||
Model 2 | LMadj | 6.169 | 0.000 | 11.994 | 0.000 | ||
adj | 13.117 | 0.000 | |||||
EI Model | Model 1 | LMadj | 9.337 | 0.000 | 7.902 | 0.000 | |
adj | 13.448 | 0.000 | |||||
Model 2 | LMadj | 5.951 | 0.000 | 13.034 | 0.000 | ||
adj | 17.612 | 0.000 |
Variables | Environmental Performance Index (EPI) | Load Capacity Factor (LCF) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
RET | EI | Green Finance | Environmental Governance | RET | EI | Green Finance | Environmental Governance | |||||
GF1 | GF2 | EPSI | LEGS | GF1 | GF2 | EPSI | LEGS | |||||
Renewable energy transition (RET) | 0.177 *** (0.000) | 0.189 *** (0.000) | ||||||||||
Environmental innovation (EI) | 0.161 *** (0.000) | 0.158 *** (0.000) | ||||||||||
Green bond insurance (GF1) | 0.102 ** (0.017) | 0.118 ** (0.010) | ||||||||||
Environmental protection expenditure (GF2) | 0.093 *** (0.000) | 0.092 ** (0.012) | ||||||||||
Environmental Policy Stringency Index (EPSI) | 0.166 *** (0.000) | 0.188 *** (0.000) | ||||||||||
Environmental legislation (LEGS) | 0.149 *** (0.000) | 0.133 ** (0.021) | ||||||||||
Economic growth | −0.144 ** (0.020) | −0.161 *** (0.000) | −0.177 *** (0.000) | −0.139 *** (0.000) | −0.147 *** (0.000) | −0.131 * (0.050) | −0.129 ** (0.027) | −0.160 *** (0.000) | −0.157 *** (0.000) | −0.113 (0.121) | −0.126 (0.114) | −0.129 ** (0.031) |
Population growth | −0.116 (0.117) | −0.169 *** (0.000) | −0.151 *** (0.000) | −0.130 * (0.062) | −0.148 ** (0.010) | −0.177 *** (0.000) | −0.181 *** (0.000) | −0.163 *** (0.000) | −0.140 ** (0.022) | −0.133 ** (0.028) | −0.151 ** (0.011) | −0.149 ** (0.019) |
Political stability | 0.078 * (0.055) | 0.077 ** (0.021) | 0.082 ** (0.029) | 0.099 *** (0.000) | 0.102 *** (0.001) | 0.081 ** (0.013) | 0.092 *** (0.000) | 0.101 *** (0.000) | 0.106 *** (0.000) | 0.117 *** (0.000) | 0.097 *** (0.000) | 0.089 *** (0.000) |
Constant | 0.644 *** (0.000) | 0.811 *** (0.000) | 0.670 *** (0.000) | 0.461 *** (0.000) | 0.583 *** (0.000) | 0.526 *** (0.000) | 0.922 *** (0.000) | 0.701 *** (0.000) | 0.390 *** (0.000) | 0.589 *** (0.000) | 0.662 *** (0.000) | 0.387 *** (0.000) |
Variables | Dependent Variable: Environmental Performance Index (EPI) | |||||||
---|---|---|---|---|---|---|---|---|
Renewable Energy Transition (RET) | Environmental Innovation (EI) | |||||||
Green Finance | Environmental Governance | Green Finance | Environmental Governance | |||||
GF1 | GF2 | EPSI | LEGS | GF1 | GF2 | EPSI | LEGS | |
Renewable energy transition (RET) | 0.095 ** (0.023) | 0.129 *** (0.000) | 0.133 *** (0.000) | 0.122 ** (0.024) | ||||
Environmental innovation (EI) | 0.130 *** (0.000) | 0.149 *** (0.000) | 0.126 ** (0.017) | 0.139 *** (0.000) | ||||
Green bond insurance (GF1) | 0.100 * (0.059) | 0.116 ** (0.013) | ||||||
Environmental protection expenditure (GF2) | 0.096 * (0.056) | 0.090 * (0.071) | ||||||
Environmental Policy Stringency Index (EPSI) | 0.136 *** (0.000) | 0.142 *** (0.000) | ||||||
Environmental legislation (LEGS) | 0.120 ** (0.038) | 0.107 * (0.061) | ||||||
RET × GF1 | 0.069 *** (0.000) | |||||||
RET × GF2 | 0.037 (0.149) | |||||||
RET × EPSI | 0.085 *** (0.000) | |||||||
RET × LEGS | 0.080 *** (0.001) | |||||||
EI × GF1 | 0.062 *** (0.000) | |||||||
EI × GF2 | 0.031 (0.133) | |||||||
EI × EPSI | 0.074 *** (0.000) | |||||||
EI × LEGS | 0.093 *** (0.000) | |||||||
Net effects | 1.013 | n.a. | 0.395 | 0.187 | 0.956 | n.a. | 0.354 | 0.215 |
Economic growth | −0.118 *** (0.000) | −0.134 *** (0.000) | −0.131 *** (0.000) | −0.146 *** (0.000) | −0.139 *** (0.000) | −0.152 *** (0.000) | −0.142 *** (0.000) | −0.138 *** (0.000) |
Population growth | −0.103 (0.117) | −0.101 * (0.073) | −0.120 ** (0.027) | −0.111 * (0.059) | −0.093 (0.010) | −0.04 (0.000) | −0.130 * (0.066) | −0.103 (0.127) |
Political stability | 0.117 ** (0.016) | 0.129 *** (0.000) | 0.112 ** (0.023) | 0.130 *** (0.000) | 0.132 *** (0.000) | 0.120 ** (0.018) | 0.119 *** (0.000) | 0.129 *** (0.000) |
Constant | 0.299 *** (0.000) | 0.418 *** (0.000) | 0.437 *** (0.000) | 0.505 *** (0.000) | 0.361 *** (0.000) | 0.419 *** (0.000) | 0.291 *** (0.000) | 0.418 *** (0.000) |
Variables | Dependent Variable: Load Capacity Factor (LCF) | |||||||
---|---|---|---|---|---|---|---|---|
Renewable Energy Transition (RET) | Environmental Innovation (EI) | |||||||
Green Finance | Environmental Governance | Green Finance | Environmental Governance | |||||
GF1 | GF2 | EPSI | LEGS | GF1 | GF2 | EPSI | LEGS | |
Renewable energy transition (RET) | 0.145 *** (0.000) | 0.139 *** (0.000) | 0.152 *** (0.000) | 0.147 *** (0.000) | ||||
Environmental innovation (EI) | 0.139 *** (0.000) | 0.140 *** (0.000) | 0.147 *** (0.000) | 0.131 *** (0.000) | ||||
Green bond insurance (GF1) | 0.123 *** (0.002) | 0.119 ** (0.021) | ||||||
Environmental protection expenditure (GF2) | 0.087 ** (0.016) | 0.078 (0.113) | ||||||
Environmental Policy Stringency Index (EPSI) | 0.142 *** (0.000) | 0.153 *** (0.000) | ||||||
Environmental legislation (LEGS) | 0.139 *** (0.000) | 0.122 ** (0.017) | ||||||
RET × GF1 | 0.058 ** (0.011) | |||||||
RET × GF2 | 0.041 (0.122) | |||||||
RET × EPSI | 0.083 *** (0.000) | |||||||
RET × LEGS | 0.094 *** (0.000) | |||||||
EI × GF1 | 0.060 *** (0.000) | |||||||
EI × GF2 | 0.048 (0.209) | |||||||
EI × EPSI | 0.077 *** (0.000) | |||||||
EI × LEGS | 0.111 *** (0.000) | |||||||
Net effects | 0.917 | n.a. | 0.408 | 0.223 | 0.938 | n.a. | 0.385 | 0.221 |
Economic growth | −0.102 (0.138) | −0.111 * (0.056) | −0.119 * (0.062) | −0.112 (0.137) | −0.077 (0.193) | −0.122 * (0.061) | −0.084 (0.161) | −0.110 (0.103) |
Population growth | −0.102 * (0.071) | −0.094 (0.101) | −0.111 (0.108) | −0.126 ** (0.022) | −0.118 ** (0.034) | −0.104 ** (0.053) | −0.122 ** (0.013) | −0.127 *** (0.001) |
Political stability | 0.103 ** (0.028) | 0.107 *** (0.000) | 0.113 ** (0.010) | 0.092 ** (0.012) | 0.104 ** (0.030) | 0.125 *** (0.000) | 0.118 *** (0.000) | 0.127 *** (0.000) |
Constant | 1.109 *** (0.000) | 0.629 *** (0.000) | 0.742 *** (0.000) | 0.579 *** (0.000) | 0.896 *** (0.000) | 0.826 *** (0.000) | 0.517 *** (0.000) | 0.790 *** (0.000) |
Variables | Environmental Performance Index (EPI) | Load Capacity Factor (LCF) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
RET | EI | Green Finance | Environmental Governance | RET | EI | Green Finance | Environmental Governance | |||||
GF1 | GF2 | EPSI | REG | GF1 | GF2 | EPSI | REG | |||||
Renewable energy transition (RET) | 0.169 *** (0.000) | 0.171 *** (0.000) | ||||||||||
Environmental innovation (EI) | 0.176 *** (0.000) | 0.169 *** (0.000) | ||||||||||
Green bond insurance (GF1) | 0.121 *** (0.002) | 0.130 *** (0.000) | ||||||||||
Environmental protection expenditure (GF2) | 0.088 ** (0.026) | 0.072 * (0.066) | ||||||||||
Environmental Policy Stringency Index (EPSI) | 0.156 *** (0.000) | 0.139 *** (0.000) | ||||||||||
Environmental legislation (LEGS) | 0.132 *** (0.002) | 0.129 ** (0.011) | ||||||||||
Economic growth | −0.152 *** (0.020) | −0.134 ** (0.031) | −0.129 ** (0.017) | −0.162 *** (0.000) | −0.130 ** (0.022) | −0.139 ** (0.020) | −0.148 *** (0.000) | −0.170 *** (0.000) | −0.132 ** (0.028) | −0.153 *** (0.000) | −0.147 ** (0.000) | −0.156 *** (0.000) |
Population growth | −0.109 ** (0.038) | −0.144 *** (0.001) | −0.139 *** (0.000) | −0.156 *** (0.000) | −0.118 * (0.052) | −0.126 * (0.067) | −0.160 *** (0.000) | −0.131 ** (0.014) | −0.127 * (0.069) | −0.159 *** (0.000) | −0.143 *** (0.000) | −0.147 ** (0.062) |
Political stability | 0.081 * (0.057) | 0.104 *** (0.000) | 0.095 ** (0.011) | 0.106 ** (0.031) | 0.121 *** (0.000) | 0.091 ** (0.026) | 0.108 *** (0.000) | 0.115 *** (0.000) | 0.099 *** (0.000) | 0.103 *** (0.000) | 0.117 *** (0.000) | 0.116 *** (0.000) |
Constant | 0.378 *** (0.000) | 0.504 *** (0.000) | 0.779 *** (0.000) | 0.618 *** (0.000) | 0.289 *** (0.000) | 0.329 *** (0.000) | 0.752 *** (0.000) | 0.738 *** (0.000) | 0.422 *** (0.000) | 0.603 *** (0.000) | 0.834 *** (0.000) | 0.819 *** (0.000) |
Variables | Dependent Variable: Environmental Performance Index (EPI) | |||||||
---|---|---|---|---|---|---|---|---|
Renewable Energy Transition (RET) | Environmental Innovation (EI) | |||||||
Green Finance | Environmental Governance | Green Finance | Environmental Governance | |||||
(1) | (2) | (3) | (4) | (1) | (2) | (3) | (4) | |
Renewable energy transition (RET) | 0.144 *** (0.000) | 0.152 *** (0.000) | 0.136 *** (0.000) | 0.145 *** (0.000) | ||||
Environmental innovation (EI) | 0.136 *** (0.000) | 0.131 *** (0.000) | 0.129 *** (0.000) | 0.140 *** (0.000) | ||||
Green bond insurance (GF1) | 0.117 *** (0.000) | 0.120 *** (0.000) | ||||||
Environmental protection expenditure (GF2) | 0.104 ** (0.011) | 0.093 ** (0.017) | ||||||
Environmental Policy Stringency Index (EPSI) | 0.138 *** (0.000) | 0.144 *** (0.000) | ||||||
Environmental legislation (LEGS) | 0.140 *** (0.000) | 0.137 *** (0.000) | ||||||
RET × GF1 | 0.051 ** (0.030) | |||||||
RET × GF2 | 0.029 (0.189) | |||||||
RET × EPSI | 0.072 *** (0.000) | |||||||
RET × LEGS | 0.089 *** (0.000) | |||||||
EI × GF1 | 0.059 *** (0.001) | |||||||
EI × GF2 | 0.033 (0.160) | |||||||
EI × EPSI | 0.081 *** (0.000) | |||||||
EI × LEGS | 0.093 *** (0.000) | |||||||
Net effects | 0.823 | n.a. | 0.358 | 0.217 | 0.922 | n.a. | 0.379 | 0.216 |
Economic growth | −0.136 *** (0.000) | −0.120 ** (0.037) | −0.117 ** (0.040) | −0.132 ** (0.010) | −0.141 *** (0.000) | −0.119 * (0.071) | −0.121 *** (0.001) | −0.141 *** (0.000) |
Population growth | −0.096 (0.125) | −0.111 (0.102) | −0.137 *** (0.000) | −0.124 * (0.053) | −0.109 (0.133) | −0.146 *** (0.000) | −0.131 ** (0.017) | −0.130 ** (0.029) |
Political stability | 0.104 *** (0.000) | 0.118 *** (0.000) | 0.109 ** (0.029) | 0.100 ** (0.011) | 0.093 ** (0.027) | 0.126 *** (0.000) | 0.097 ** (0.010) | 0.091 ** (0.028) |
Constant | 0.994 *** (0.000) | 0.738 *** (0.000) | 0.389 *** (0.000) | 0.361 *** (0.000) | 0.749 *** (0.000) | 0.520 *** (0.000) | 0.467 *** (0.000) | 0.639 *** (0.000) |
Variables | Dependent Variable: Load Capacity Factor (LCF) | |||||||
---|---|---|---|---|---|---|---|---|
Renewable Energy Transition (RET) | Environmental Innovation (EI) | |||||||
Green Finance | Environmental Governance | Green Finance | Environmental Governance | |||||
(1) | (2) | (3) | (4) | (1) | (2) | (3) | (4) | |
Renewable energy transition (RET) | 0.159 *** (0.000) | 0.146 *** (0.000) | 0.151 *** (0.000) | 0.163 *** (0.000) | ||||
Environmental innovation (EI) | 0.147 *** (0.000) | 0.138 *** (0.000) | 0.152 *** (0.000) | 0.149 *** (0.000) | ||||
Green bond insurance (GF1) | 0.131 *** (0.000) | 0.125 *** (0.000) | ||||||
Environmental protection expenditure (GF2) | 0.107 ** (0.022) | 0.119 *** (0.000) | ||||||
Environmental Policy Stringency Index (EPSI) | 0.136 *** (0.000) | 0.141 *** (0.000) | ||||||
Environmental legislation (LEGS) | 0.121 *** (0.000) | 0.119 ** (0.023) | ||||||
RET × GF1 | 0.060 *** (0.000) | |||||||
RET × GF2 | 0.046 (0.129) | |||||||
RET × EPSI | 0.077 *** (0.000) | |||||||
RET × LEGS | 0.102 *** (0.000) | |||||||
EI × GF1 | 0.064 *** (0.000) | |||||||
EI × GF2 | 0.037 (0.162) | |||||||
EI × EPSI | 0.083 *** (0.000) | |||||||
EI × LEGS | 0.099 *** (0.000) | |||||||
Net effects | 0.958 | n.a. | 0.389 | 0.264 | 0.999 | n.a. | 0.179 | 0.229 |
Economic growth | −0.155 *** (0.000) | −0.147 *** (0.000) | −0.171 *** (0.000) | −0.151 *** (0.000) | −0.169 *** (0.000) | −0.150 *** (0.000) | −0.131 ** (0.016) | −0.166 *** (0.000) |
Population growth | −0.126 ** (0.041) | −0.13 ** (0.021) | −0.139 *** (0.001) | −0.144 *** (0.000) | −0.128 *** (0.000) | −0.135 *** (0.000) | −0.147 *** (0.000) | −0.159 *** (0.000) |
Political stability | 0.102 ** (0.011) | 0.097 *** (0.000) | 0.112 *** (0.000) | 0.090 ** (0.027) | 0.108 *** (0.000) | 0.099 *** (0.000) | 0.110 *** (0.000) | 0.123 *** (0.000) |
Constant | 0.272 *** (0.000) | 0.430 *** (0.000) | 0.338 *** (0.000) | 0.381 *** (0.000) | 0.295 *** (0.000) | 0.476 *** (0.000) | 0.328 *** (0.000) | 0.298 *** (0.000) |
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Omri, A.; Hamza, F.; Alkahtani, N. When Do Innovation and Renewable Energy Transition Drive Environmental Sustainability? Sustainability 2025, 17, 6910. https://doi.org/10.3390/su17156910
Omri A, Hamza F, Alkahtani N. When Do Innovation and Renewable Energy Transition Drive Environmental Sustainability? Sustainability. 2025; 17(15):6910. https://doi.org/10.3390/su17156910
Chicago/Turabian StyleOmri, Anis, Fadhila Hamza, and Noura Alkahtani. 2025. "When Do Innovation and Renewable Energy Transition Drive Environmental Sustainability?" Sustainability 17, no. 15: 6910. https://doi.org/10.3390/su17156910
APA StyleOmri, A., Hamza, F., & Alkahtani, N. (2025). When Do Innovation and Renewable Energy Transition Drive Environmental Sustainability? Sustainability, 17(15), 6910. https://doi.org/10.3390/su17156910