Policy framework considering resource curse, renewable energy transition, and institutional issues: Fostering sustainable development and sustainable natural resource consumption practices

Abstract

The “natural resource curse” hypothesis, which is regarded as the paradox of plenty, highlights the detrimental impacts of natural resources on economic growth. Hence, unsustainable natural resource extraction or utilization is a substantial challenge for sustainable development. However, sustainable utilization of natural resources and the transition towards renewable energy sources present viable pathways for achieving sustainable development and financial globalization and institutional quality can serve as essential catalysts to this endeavor. Accordingly, this research examines the influence of natural resource rents (NRR) on sustainable development in emerging countries considering the roles of renewable energy transition, financial globalization, and institutional quality. To do this, yearly data from 1990 to 2020 is analyzed using the method of moments quantile regression. The findings unveiled that NRR impede sustainable development, supporting the “resource curse hypothesis”. The results further indicate that the transition to renewables and increasing financial globalization contribute to sustainable development. In addition, institutional quality promotes sustainable development in emerging economies. Finally, causality analysis shows causality from NRR, financial globalization, and institutional quality to sustainable development. Meanwhile, bidirectional causality was identified between renewable energy transition and sustainable development. Moreover, financial globalization and institutional quality have a causal impact on the renewable energy transition. These empirical results provide substantial implications for policymakers in these countries to craft efficacious strategies for pursuing development, by improving natural resource management and accelerating the transition to renewable energy.