Examining Energy Transition And Its Drivers In China And OECD Countries

The unpredictable surge in global warming and climatic issues urges serious efforts internationally to meet the Paris Agreement to keep the global temperature below 2degrees Celsius.Therefore,a sustainable solution is necessary for the future,as most regions are still under high pollution and carbon regime borne by traditional sources of fuels.In this context,transitioning energy resources from traditional to more clean and sustainable energy resources is a key international political agenda.Due to disruptive geopolitical events,the global energy transition has become a big issue.Across the world,people are struggling to attain the SDGs 7 and 13 goals,and one of the major impediments is the transition of energy toward green or sustainable energy resources.The failure of China and OECD countries can be hazed for global efforts toward mitigating climatic changes and curbing greenhouse gas emissions because it can be a justification for developing economies to avoid their responsibilities toward the environment.Likewise,China and OECD countries cannot fulfill their responsibilities toward SDG 7 and SDG 14.Therefore,the key agenda of Cop26 is to analyze and select the best policy option for sustainable and smooth tarnation of energy from fossil energy to green or clean sources of energy.In parallel to the COP26 goals,this dissertation formulates a policy framework for China and OECD countries to explore the impact of environmental technology,green finance,and trade openness along with different policy regimes to attain the energy transition under the prevalence of environmental governance regimes,the driving factors of energy transition is investigated.Besides that,the dissertation employed a newly proposed energy transition index based on Energy Ladder Hypothesis,which accounts for the movement along the energy ladder.The data is comprised of 37 countries of OECD for full sample and segregating sample based on level of emission from 2005 to 2021.In case of China,study has employed time series data for 24 years over the period of 1998 to 2021.The dissertation employed a two-step GMM econometric technique for panel data,and robust the full sample with 2SLS as an alternative technique and energy efficiency as an alternative specification.Moreover,concerning estimate the models’ parameters for OECD countries,the dissertation has captured the static,dynamic,and extreme marginal impact of drivers of the energy transition.For timeseries data in case of China,dissertation has adopted a nonlinear NARDL approach and Hatemi-J causality test.Findings for the full sample of OECD countries indicate that in the absence or presence of regional authority as moderator under adaptation and mitigation laws,environmental technology and green finance positively impact the energy transition process.However,under the condition of climate adaptation and mitigation laws,and in the presence or absence of moderation,trade openness negatively impacts energy transition.likewise,while computing the marginal impact under all their conditions,it is observed that regional authority augmented the energy transition;however,implementation of climate change laws has mixed results.Though,overall results reflect that under climate adaptation laws,the driving factor of energy transition is better performed.The results for the segregated sample revealed that in case of both high and low emitters,environmental technology and energy transition augmented the energy transition.Although,in case of high emitter under both conditions,trade openness hurts energy transaction.Unlike the findings of full sample and high emitters,it is interesting to observe that in case of low emitter,trade openness has a positive impact on energy transition.For in-depth analysis,the dissertation compared the marginal impact of high and low emitters.It is observed that under the prevalence of regional authority for climate adaptation and mitigation laws,low emitters are better performers then high emitters.In case of China,the study has reported the non-linear and asymmetric effects of environmental technology,green finance,and trade openness on energy transition.Through bound test,study have confirmed the existence of long run asymmetric cointegration between the policy instruments.For long and short run,the positive and negative shocks of environmental technology and green finance augmented the asymmetric relationship with energy transition.However,it is interesting to observe that in long run the positive shock of trade openness has adverse effects on energy transition.However,in short run positive shock of trade openness improve the energy transition process.Through causality test,study also reported the bidirectional asymmetric causal relationship between positive and negative shocks running form environmental technology to energy transition.This dissertation contributes to the body of knowledge in the following ways: First,A new research view or perspective: This empirical study advances in energy and governance research and contributes exiting body of knowledge(theoretically and empirically).While ignoring the actual results of the processes,past studies have focused on the demand dynamics of the energy transition.Several past studies have focused on energy transition,environmental technology,and green finance but these studies have overlooked the different policy implication mechanisms and faced criticism on energy transition indices.Therefore,these studies cannot identify the key responsibilities of the China and OECD countries toward climate change and global warming.However,this study formulates a new framework with environmental policy regimes to examine the impact of environmental technology,green finance,and trade openness on energy transition.Further,this study theoretically contributes to the literature body by using a new Energy Transition Index.Unlike these indices(facing criticism and limitations),the newly proposed index follows the fundamentals of Energy Ladder Hypothesis.For both renewable and fossil energy sources,this newly proposed energy transition index can account for emission reduction ability.Secondly,newly proposed study: past research studies only focused on financial(fiscal)decentralization to see how it influence the energy transition,however we are examining how overall decentralization can influence the energy transition.This study also investigates the moderation relationship of policy variables.Moreover,study also distributed the OECD countries into low to high emitters countries to examine the factors that identify weather high emitting countries’ energy transition with the same magnitude as that of low emitters.However,the number of unobserved(social,economic,and political factors)can influence the formulation of policy framework and these factors might lead to an issue in estimation(endogeneity problem).Third advance econometric techniques: To address possible endogeneity issues,along other econometric techniques,this study employing Two-step Generalized Method of Moments(two step system GMM).This technique helps to capture the cross sectional(cross-country)study,hence information on the differences is not emitted as it uses the first difference as an instrument(Difference–GMM),so it is one of the efficient techniques for this study.Further,this study employs the marginal impact to compute the static,dynamic and extreme marginal impact of factors influencing energy transition.On parallel side,study have employed nonlinear NARDL approach to capture the asymmetric effect of timeseries data in case of China.Finally,study employed asymmetric Hatemi-J causality test to examine the casual relationship between policy instruments.Based on the findings,study has recommended a policy framework that will help policymakers and governments to achieve the SDG goals by straightening the climate change adaption and mitigation policies.Based on findings,the activation of three levels,enable policy formulators to attain the energy transition process in China and OECD countries.The transition of energy form raw form to more purified form of energy can be attained through promotion of green technology,restructuring green financial channels,and monitoring the channels of trade openness.The recommended three phase policy will align with change in environmental policies,to facilitate the China and OECD countries in attaining the SDG goal number 7 and subsequently,SDG goal number 13.