Green Energy Transition and Development Outcomes in Emerging Economies

This paper investigates the economic and environmental effects of the green energy transition in emerging market economies. Focusing on ten major emerging countries from 2010 to 2022, we examine how renewable energy consumption relates to economic growth, sustainable development, and environmental outcomes. Using panel data and a two-way fixed effects model (with country and year fixed effects), we analyze three key dimensions of development: gross domestic product (GDP) per capita, broad-based sustainable development (measured via the Sustainable Development Goals (SDG) Index and Human Development Index (HDI), and environmental quality (per capita CO₂ emissions). The empirical results indicate that expanding renewable energy usage significantly reduces CO₂ emissions, but it may entail a modest short-term trade-off with economic growth. Renewable energy’s impact on composite sustainable development indicators is less immediate: we find no clear short-run effect on the SDG index, even as renewable uptake shows a positive association with the HDI. Additionally, foreign direct investment (FDI) exhibits a negative relationship with carbon emissions (suggesting a potential “pollution halo†effect), whereas greater trade openness is associated with higher emissions. These findings highlight important policy implications for emerging economies — namely, while green energy transitions can yield substantial environmental benefits and support human development, complementary economic policies are needed to mitigate short-run growth costs and fully realize sustainable development gains.