Extraction of natural resources and sustainable renewable energy: COP26 target in the context of financial inclusion

Abstract

Transitioning towards REC is essential to meet the COP26 net zero emissions target by 2050. In this perspective, FI is a necessary enabler of the REC transformation. The switching of Natural Resources industries to Sustainable Renewable Energy not only helps to attain the COP26 target but also helps the economy to achieve Sustainable Development Goals. To accomplish this objective, the current research investigates the influence of the Extraction of Natural Resources and financial inclusion in addition to the composite risk index and the development of environment-related innovation on renewable energy consumption by utilizing annual data of selected OECD countries from 2004 to 2020. Pesaran CD and Likelihood ratio test indicate cross-section dependence and heteroskedasticity among the chosen panel. All of the variables were found to have non-normal or non-parametric distributions by the normality tests, allowing this study to employ the novel method of moments quantile regression (MMQR). We used the PCA in two stages to calculate the multidimensional financial inclusion index. However, the impact of ENR is revealed to be positive and significant on REC throughout the chosen quantiles. The other three variables show a similar pattern. These findings are confirmed by quantile regression, which is found to be robust. This study recommends appropriate policies to decision-makers based on the empirical findings regarding the appropriate handling of natural resource rent, enhancement of financial inclusion, further development of eco-innovation, and improvement of composite risk index that would lead to the encouragement of Sustainable Renewable Energy.