Institutional governance shapes how green energy boosts environmental sustainability

Green energy transition can improve environmental sustainability in 25 emerging and developing economies, but only when paired with strong institutional governance, according to a new study published in the journal Energy, Sustainability and Society. The research, led by Ridhima Abrol and Meenakshi Gupta, examined how the quality of a country’s institutions moderates the relationship between the shift to renewable energy and environmental outcomes between 2000 and 2021.

Instead of relying on a single environmental indicator such as carbon emissions, the researchers used the load capacity factor as their measure of environmental sustainability. This composite metric captures both the demand side and the supply side of the economy, meaning it reflects not only how much pressure economic activity places on the environment but also how much the natural resource base can supply. The study also considered green technology innovation, gross domestic product, energy intensity, foreign direct investment and trade openness as explanatory variables.

Methodologically, the authors applied the Cross-Sectional Augmented Autoregressive Distributed Lag modelling approach to panel data covering the 25 emerging and developing nations over the 2000 to 2021 period. Before estimating the final model, all required pre-estimation tests were carried out. To check that the findings were robust, the team repeated the analysis using two additional econometric techniques, the Generalized Method of Moments and Fully Modified Ordinary Least Squares.

The results show that green energy has a positive and statistically significant impact on the load capacity factor, meaning that a greater share of renewable energy in the mix is associated with better environmental sustainability. Green technology innovation likewise shows a positive effect on the load capacity factor. In contrast, GDP, energy intensity, foreign direct investment and trade openness each display a negative and significant impact, which the authors interpret as evidence of environmental deterioration associated with these factors in the sampled countries.

The most striking finding concerns the role of institutions. On its own, institutional quality shows a negative but significant impact on the load capacity factor in the sample. However, the interaction term combining green energy with institutional governance reveals a positive and significant effect, indicating that strong institutions strengthen the relationship between the green energy transition and environmental sustainability. In other words, the environmental benefit of moving to renewable energy is amplified where governance frameworks are robust.

Based on these outcomes, the study offers several policy recommendations. The authors emphasise the need to integrate institutional frameworks with the energy sector by expanding renewable energy infrastructure and incentivising the transition from fossil fuels to clean energy sources through subsidies and supportive regulatory frameworks. They argue that strengthening institutional quality is not merely a political goal but can also serve environmental objectives, by directing investment towards green projects and enacting laws that encourage sustainable practices, creating better pathways for sustainable innovation and environmental sustainability.

The study addresses a timely global concern. As the authors note in their background section, attaining environmental sustainability has become a global issue due to increasing emissions, climate change and biodiversity loss, and rising industrial activity and economic expansion make it increasingly important for emerging and developing economies to cut emissions, shift towards green energy and achieve sustainability.

The article was published on 21 September 2026 as an open access research paper, and the version shared at publication is a peer-reviewed, accepted manuscript carrying a permanent DOI, subject to further edits before the final Version of Record appears. For readers and policymakers in emerging economies, the central message is that renewable energy deployment and institutional quality are complementary levers: the data suggest that investing in green energy yields the greatest environmental returns in countries that also invest in the governance structures needed to steer that transition.

Subject of Research: How institutional governance moderates the impact of green energy transition on environmental sustainability in 25 emerging and developing economies

Article Title: Examining the moderating effect of institutional governance on the nexus between green energy and environment sustainability

Article References: Abrol, R., & Gupta, M. (2026). Examining the moderating effect of institutional governance on the nexus between green energy and environment sustainability. Energy, Sustainability and Society. https://doi.org/10.1186/s13705-026-00612-9

Image Credits: AI Generated

DOI: 10.1186/s13705-026-00612-9

Keywords: green energy, institutional governance, environmental sustainability, load capacity factor, renewable energy, green technology innovation, emerging economies, panel data, energy transition, environmental policy, Examining, moderating