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The role of renewable energy (REN) in promoting economic growth and improving environmental quality has been widely debated and extensively researched in the existing body of knowledge during the last couple of decades. However, the specific role of REN in promoting sustainable development (SUD) is yet to be researched in the presence of the moderating role of institutional quality in the context of G-7 economies. Accordingly, this research study attempts to explore the potential relationship between REN and SUD in the presence of the moderating role of institutional quality by utilizing data from G-7 economies for the period 2002–2022. Acknowledging the presence of cross-sectional dependency, serial correlation, and heteroscedasticity, the present study used the fixed effects estimator with Driscoll–Kraay standard errors. The results demonstrated a positive and statistically significant influence of REN on SUD. Furthermore, the findings demonstrated that institutional quality moderates the relationship between REN and SUD and sustainable development effectively. Moreover, we found that trade openness and unemployment rate are the main driving forces of SUD. In addition, we found that government expenditures, inflation rate, and CO2 emissions are detrimental from the perspective of SUD. Finally, we found that industrialization and institutional quality in isolation are unable to explain variation in the level of SUD in the case of G-7 economies. The causality analysis also demonstrated a one-way causal impact of REN on SUD. The study’s findings offer valuable policy suggestions related to the transition towards REN and accelerating the pace of SUD for the consideration of the policymakers of G-7 economies.
Alfalih et al. (Tue,) studied this question.