Financial and institutional drivers of clean energy adoption: Evidence from E7 economies

The global shift towards clean energy is crucial to solving climate change and meeting sustainable development goals. However, many countries face huge barriers to the adoption of clean energy, especially in the financial and institutional framework. Therefore, this study attempts to investigate the roles of financial and institutional domains including financial openness (FO), financial development (FD), government effectiveness (GE), and regulatory quality (RQ) in promoting clean energy (CLEN) adoption. To achieve this objective, the study utilized the data of the E7 economies over the period of 1999-2022 and applied FMOLS to empirically estimate the results. The findings show that FO have negative while, GE and RQ have positive and significant relationships with CLEN. However, the result of FD does not show any significant relationship with CLEN. The study offers a holistic approach of combining both financial and institutional factors to explain the determinants of CLEN adoption. The results of this study suggest that GE and RQ need to be improved to promote the adoption of clean energy sources, but financial openness needs to be closely regulated to avoid adverse impacts.