Human Capabilities and Governance Mechanisms as Catalysts for Green Energy Supply: Insights from Natural Resource–Rich Countries

Abstract

Existing studies were centered on the factors that could mitigate the environmental degradation, but few of them were focused on finding radical solutions by examining the nexus between human and institutional capacities and green energy supply. The use of clean energy can be an alternative for this purpose that can improve the quality of the environment. This study aims to examine the role assigned to human and institutional capacities in order to boost the renewable energy sector on the supply side in the long-term, basing on the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS). Moreover, the study applies panel threshold regression to 21 natural resource–rich countries that are most exposed to the challenges of switching to renewable energy. So, the objective of the present study is to investigate the effects of the human facet and the different governance mechanisms on the renewable energy supply while examining whether these impacts are conditioned by the threshold of a human capital index. Results based on panel threshold regression revealed that the effects of human capital and governance on renewable energy supply differ substantially depending on the human capital index and governance mechanisms. Indeed, human capital exerts negative effects on renewable energy supply for countries when the human capital index is above the threshold value. High and upper middle-income countries benefit more from human capital for the renewable energy production compared to low and lower-income countries in the long-term. Our results also disclosed that the governance mechanisms relating to the voice and accountability exert positive effects on renewable energy supply regardless the human capital threshold level and also for low and lower-middle-income countries in the long term. The control of corruption is beneficial in reinforcing renewable energy supply only in the case of high upper middle-income countries. Therefore, the results of this research emphasized the importance of human capital and good governance practices as levers for the transition to the era of renewable energy and can lead to several recommendations for policy makers.