Testing the load capacity curve hypothesis: The role of government effectiveness, hydroelectric energy, urbanization, and sustainable uncertainty index across presidential and parliamentary systems

This study examines the validity of the Load Capacity Curve (LCC) hypothesis in countries with presidential and parliamentary governance systems from 2003 to 2022. Using a balanced panel of countries classified by governance system, the analysis employs the panel Method of Moments Quantile Regression model to capture distributional heterogeneity in environmental quality. The model includes hydropower electricity generation, government effectiveness, a newly developed Sustainable Uncertainty Index, and urbanization as key determinants of environmental load capacity. The empirical findings confirm the validity of the LCC hypothesis in both governance systems. Hydropower generation consistently enhances environmental quality across quantiles, while the Sustainable Uncertainty Index and urbanization have negative effects. Government effectiveness improves environmental quality in parliamentary systems but has an adverse impact in presidential systems, highlighting the role of institutional structures. Based on these findings, the study suggests that policymakers should prioritize long-term investments in hydropower infrastructure, integrate sustainability principles into urban planning, and strengthen institutional transparency and policy predictability to reduce sustainability-related uncertainty. Additionally, governance-specific environmental strategies should be developed, as institutional effectiveness functions differently across political systems. These policy implications underscore the critical role of governance structures and uncertainty management in achieving climate change mitigation and sustainable development goals.