Does Institutional Quality Moderate the Effect of Trade Openness on Renewable Energy Transition? Quantile Evidence from Emerging Economies

This study examines whether institutional quality moderates the relationship between trade openness and renewable energy transition across thirteen emerging economies over the period 2007–2024. Using a panel framework, the analysis employs Feasible Generalized Least Squares (FGLS), Driscoll–Kraay standard errors, and Method of Moments Quantile Regression (MMQR) to capture both average and distribution-specific effects. The results show that gross fixed capital formation and institutional quality are among the most consistent positive determinants of renewable energy consumption, whereas urbanization and technological innovation, proxied by high-technology exports, exert predominantly negative effects. The effect of trade openness is heterogeneous across the distribution of renewable energy consumption, shifting from positive at lower quantiles to negative at higher quantiles. Most importantly, the interaction between trade openness and institutional quality is positive and statistically significant, with its effect becoming stronger toward the upper quantiles. This finding suggests that stronger institutions enhance countries’ capacities to translate the benefits of international trade, including technology diffusion, investment, and knowledge spillovers, into renewable energy development. The study therefore contributes to the literature by providing quantile-based evidence that the trade openness–renewable energy relationship is conditional on institutional quality and the stage of renewable energy transition. The findings suggest that trade liberalization and institutional strengthening should be pursued as complementary policy strategies to accelerate renewable energy transition in emerging economies.

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