The Heterogeneous Effect of Energy Transition, Environmental Policies and Green Financial Policies on Ecological Footprint: An OECD Perspective

Unsustainable economic development and ecological degradation are major challenges for human beings. Human welfare can be obtained by promoting transition towards cleaner and more efficient energy usage, adopting environmental legislation, and reforming financial system. However, prior studies overlook the role of energy transition, environmental policies, and green financial policies on ecological footprint. Hence, this research investigates the heterogeneous effects of energy transition, environmental policies, and green financial policies on environmental footprint of 27 OECD nations. For this purpose, we examine the period from 2000 to 2019 using the non-additive fixed effects quantile regression. Our results show that energy transition exerts a harmful impact on ecological sustainability in countries with relatively better ecological quality while leading to an improvement in ecological sustainability in countries with relatively worse ecological quality. It is concluded that environmental policy and green financial policy significantly reduce ecological footprint in OECD countries. The favorable impact of environmental policy intensifies as ecological quality degrades while the favorable impact of green financial policy varies considerably across the distribution of ecological footprint. These findings have significant policy implications in the quest for environmental sustainability.