Advancing the affordable and clean energy in large energy-consuming economies: The role of green transition, complexity-based, and geostrategy policies

Abstract

With decreasing costs of the clean technologies, the balanced scales of the Sustainable Development Goal 7 targets, e.g., energy equity (EE), energy security (ES), and environmental sustainability (EVS), are quickly changing. This fundamental balancing process is a key requirement for a net-zero future. Accordingly, this research analyzes the regime-switching effect of Hydrogen economy as the green transition, sharing economy and economic complexity as the complexity-based, and geopolitical risks and energy prices as the geostrategy policies on the Goal 7 targets. To this end, a Markov-switching panel vector autoregressive method with regime-heteroskedasticity is applied to study advancing the Goal 7 in the world's twenty-five large energy consumers during 2004–2020. Concerning the parameters and statistics of the model, the results refer to the existence of two regimes associated with the Goal 7 corners, called “upward and downward” regimes for EE and “slightly upward and sharply upward” regimes for ES and EVS. It is revealed that the vulnerability of EE and ES targets is considerably reduced when the regime switches to the dominant regime that is “downward” and “slightly upward” regimes respectively, and that of the EVS target remains unaffected. Through the impulse-response analysis, the findings denote that the first hypothesis of the efficiency of the Hydrogen economy in promoting the Goal 7 targets is insignificant. However, the significant short-term and dynamic shock effects of the complexity-based and geostrategy policies on the Hydrogen economy are detected, which will be a feasible alternative assessment in advancing the Goal 7. Further, the complexity-based policies support the Goal 7 targets under different regimes, especially in the short- and medium-term. Hence, the second hypothesis regarding the effectiveness of the complexity-based policies in promoting Goal 7 targets is confirmed. The third hypothesis concerning the complexity of the impact of geostrategy policies on the Goal 7 targets is verified. Particularly, the switching process towards the Goal 7 may not necessarily be restricted by the geopolitical risks. Moreover, EE is supported through energy prices in the short-term under both regimes, while they are non-conductive to promote ES and EVS through time. Accordingly, the decision-makers should acknowledge adopting a regime-switching path forward for ensuring the time-varying balanced growth of the Goal 7 targets as the impact of the suggested policy instruments is asymmetric.