Clean to dirty energy consumption ratio, institutional quality, and welfare; an inter-continental panel quantile analysis

Abstract

Since the end of the 20th century, research about the type of energy consumption has grown dramatically. Nevertheless, in previous studies there were two neglected essential questions; “Why does the desire for clean energy vary across the country?” and “What factors increase the desire for clean energy?”. This study was conducted to investigate the impact of institutional quality and gross domestic product per capita as a proxy of welfare on the clean to dirty energy consumption ratio among 75 countries over the period 1996–2018. Here, the energy source from which carbon emissions are negligible or zero is called clean energy. In contrast, the energy source with significant carbon emissions is called dirty energy. The results of the random-effect panel quantile regression indicate positive and significant effects of rule of law on the clean to dirty energy consumption ratio. As, in the first decile (polluted countries from the perspective of energy consumption) by increasing one unit in rule of law, the clean to dirty energy consumption ratio shall increase by 0.027. Also, welfare has a positive and significant effect on the clean to dirty energy consumption ratio. Therefore, if gross domestic product per capita increases by one unit (equal to a thousand dollars), then the clean to dirty energy consumption ratio will increase by 0.0022, in the first decile. Nevertheless, the initial conditions of countries such as the existence of oil or gas resources, the capacity to generate nuclear power, and the existence of water resources are the most influential factors on the clean to dirty energy consumption ratio. Therefore, one of the appropriate and long-run policies for the transition from communities based on dirty energies consumption to communities based on clean energies consumption is to improve the institutional quality and the welfare level of communities.