The Impact of Environmental Policy Stringency and Economic Complexity on Nations’ Energy Transitions: The Mediating Role of FinTech Financing Energy Economics

The degradation of the environment, driven by the reliance on fossil fuels, has prompted governments to shift towards renewable energy sources. While the topic of energy transitions is gaining researchers' attention, the contribution of factors related to policy, the environment, the economy, finance, and technology is still unclear. One such factor is environmental policy stringency that potentially reduces the ecological footprint and encourages green energy use. Another noteworthy factor is economic complexity, which supposes that countries dispose of resources to facilitate the green energy transition. Finally, FinTech (Financial Technology) is worth considering as it facilitates access to funds and promotes sustainable investments thus aiding energy transitions. This study therefore aims to empirically investigate the contribution of environmental policy stringency, economic complexity, and FinTech financing to countries' energy transitions and tests for the mediating role of FinTech. It uses panel data for 29 countries between 2010 and 2020 and employs Instrumental Variables (IV) 2-step GMM and IV 2-stage least squares estimation techniques. Results show that economic complexity and environmental policy stringency foster energy transitions. FinTech financing positively influences energy transitions and mediates the relation between energy transition and economic complexity. These findings show the importance of FinTech in funding cleaner energy sources, the significance of economic complexity in achieving energy transitions, and highlight the role of governments' stringent environmental policies in encouraging the move away from fossil fuels.