When Do Innovation and Renewable Energy Transition Drive Environmental Sustainability?

Anis Omri (), Fadhila Hamza () and Noura Alkahtani
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Fadhila Hamza: Department of Accounting, College of Business Administration, Princess Nourah Bint Abdulrahman University, P.O. Box 84428, Riyadh 11671, Saudi Arabia
Noura Alkahtani: Department of Accounting, College of Business Administration, Princess Nourah Bint Abdulrahman University, P.O. Box 84428, Riyadh 11671, Saudi Arabia

Sustainability, 2025, vol. 17, issue 15, 1-26

Abstract: This study examines the contributions of renewable energy transition (RET) and environmental innovation (EI) to environmental performance in G7 countries from 2003 to 2021, with a focus on the transmission channels of green finance and environmental governance. Using the Augmented Mean Group (AMG) estimator and confirming robustness through the Dynamic Common Correlated Effects Mean Group (DCCE-MG) method, the study explores both direct and indirect effects of RET and EI on two key environmental indicators: the Environmental Performance Index and the Load Capacity Factor. The results reveal that both RET and EI have a significant impact on environmental performance. Moreover, green finance and environmental governance serve as crucial channels through which RET and EI exert their influence. These findings underscore the importance of developing effective financial instruments and robust regulatory frameworks to translate energy and innovation policies into tangible environmental benefits. By highlighting the interplay between technological advancement, financial capacity, and institutional quality, this study provides novel insights into the environmental policy landscape of advanced economies and offers guidance for designing integrated strategies to achieve long-term sustainability goals.

Keywords: environmental performance; renewable energy; environmental innovation; green finance; environmental governance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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