Determinants of sustainable energy in OECD countries: Role of technology and financial resources

Abstract

Financial development is a leading factor toward economic expansion and endorsing energy innovations worldwide. However, financial development has alarmed stakeholders to evade its harmful impacts on environmental performance. Following the energy trade theoretical perspective, this paper aims to scrutinize the effects of financial development, environment-related technology and foreign direct investment (FDI) on sustainable energy in Organization for Economic Cooperation and Development (OECD) economies over the period 1990–2020. To reduce the omitting variables' errors, a pool of control variables consisting of urbanization, economic growth and exports is constructed. The study's empirical findings based on the system Generalized Method of Moments (GMM) model elaborate that financial development significantly promotes renewable energy consumption and mitigates environmental deterioration in advanced nations. In terms of environment related technologies (ERT) and FDI, both become a cause to significantly preserve the environmental quality to align with carbon neutrality targets and sustainable development goals (SDGs). These outcomes are further validated with quantile regression to report the heterogeneous results. In the end, this article suggests necessary policy implications for the stakeholders.