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The transition to renewable energy through financial development and under natural resources threshold in emerging countries

Author

Listed:
  • Tarek Bel Hadj

    (Qassim University
    University of Carthage)

  • Adel Ghodbane

    (Qassim University)

  • Ezzedine Ben Mohamed

    (Qassim University
    University of Sfax)

  • Abdullah Abdulmohsen Alfalih

    (Majmaah University)

Abstract

Faced with ecological and environmental constraints and increased uncertainty relating to non-renewable energy sources, the transition to green energy is currently proving to be an urgent necessity. Despite this context, the factors conditioning the renewable energy demand relating especially to the financial system and natural resource endowments remain an understudied and insufficiently investigated. The objective of this paper is to examine the repercussions of financial development (FD) and the abundance of natural resources on the demand for renewable energy under a given threshold value of natural resources. For this purpose, we applied the Dumitrescu Hurlin panel causality test and the panel threshold regression to the context of 20 emerging countries over the period 1994–2019. Our results revealed that natural resource rents (NRR) Granger causes unidirectionally renewable energy consumption (REC) in selected emerging countries, specifically high and upper middle-income (HUMI) countries. The causality test also showed that there is a bidirectional causality between FD and REC in the case of HUMI countries, and the absence of causality in the case of low and lower middle-income (LLMI) countries. Our findings also disclosed that NRR substantially decrease renewable energy demand for HUMI countries when NRR are above the threshold value of 1.600, and consolidate the transition to renewable energy in the case of LLMI countries when NRR are below the threshold value of 7.298. FD exerts negative effects on the REC in HUMI countries whatever the threshold value of NRR. According to our results, the rise in oil prices exerts negative effects on the REC in LLMI countries whatever the threshold value of NRR. It also emerges from our results that human capital promotes REC, but only above the threshold value. From this study, it appears that the decision makers of the emerging countries must formulate their strategies relating to the transition to environmentally-friendly energy depending on the thresholds of NRR and the income recorded. In addition, several imperatives arise with regard to the financial sector to boost the demand for clean energy.

Suggested Citation

  • Tarek Bel Hadj & Adel Ghodbane & Ezzedine Ben Mohamed & Abdullah Abdulmohsen Alfalih, 2025. "The transition to renewable energy through financial development and under natural resources threshold in emerging countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(5), pages 11905-11929, May.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:5:d:10.1007_s10668-023-04389-1
    DOI: 10.1007/s10668-023-04389-1
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