The effect of institutions in the energy- growth -human development nexus

Abstract

Abstract

Climate change is one of the most significant market failures transpiring. Government intervention is required to correct this market failure to avoid catastrophic repercussions of the existential threat climate change poses. Governments have prioritised their energy sector given the commitments to transition to low-carbon economies. The energy sector faces many challenges, ranging from decreasing CO2 emissions, increasing energy access, and eradicating energy poverty to mitigating the effects of climate change. Governments need a framework to address and balance the complex climate change mitigation, sustainable economic growth, and human development issues. Leveraging effective institutions can assist in sustainable development and climate change mitigation. Effective institutions can be considered a crucial instrument for policymakers to reconcile climate change mitigation, economic growth, and human development policies into one framework that can be used to attain targeted outcomes concerning sustainable development goals (SDGs) and climate change goals.

Utilizing panel data analysis as the methodological foundation, this thesis's chapters systematically investigate the influence exerted by institutional aspects upon various dimensions, including but not limited to the electricity sector, economic growth, CO2 emissions, and human development.

The energy transition is crucial in ensuring a sustainable future for all. Electricity availability and generation capacity have a significant impact on the economies internationally (Saraji et al., 2023; Figueiredo et al., 2022) and are imperative towards attaining SDG’s. Given the law of supply, understanding the factors affecting the electricity supply sector is imperative towards improving the industry and achieving a sustainable energy future for all, as per the United Nations SDGs for 2030. The first part of the thesis focuses on institutions’ impact on the electricity supply of twenty countries, representing various electricity market structures and supply mixes. According to the thesis’s findings, institutional quality can potentially improve the accessibility of electricity supply and the achievement of efficiency benefits. Here, the thesis contributes to the existing body of knowledge by examining how six individual institutional aspects affect the electricity supply for 20 countries.

In 2015, the COP21 countries made pledges to reduce CO2 emissions, focusing on decreasing emissions in the energy sector. CO2 emissions are determined by many factors, such as economic growth and institutions that implement policies affecting CO2 emissions directly and indirectly. This thesis examines the relationship between CO2 emissions, economic growth and human development. The analysis of this question is twofold: first, an STIRPAT model is used to analyse the influence of population, affluence, technology and institutions on CO2 emissions. The analysis then examines the impact of institutional quality in the relationship between CO2 emissions and economic growth within a Rostow growth theory framework at different developmental stages. The thesis's contribution to the existing body of knowledge is Rostow’s growth theory framework, which crucially assisted in linking theoretical expectations with empirical results by thoroughly explaining the relationships that evolve between emissions, economic growth, and institutions for different stages of nations' income levels.

The energy sector emissions indirectly affect human development through climate change. For many decades, countries have been experiencing the challenge of maintaining sustainable and inclusive human development while mitigating climate change. Climate change and human development cannot be isolated. Human development assists with the necessary skills and technological advancement to mitigate climate change, yet climate change can stagnate these advancement efforts. To ensure both goals regarding these issues are met, a mediator between them is necessary, and the institution's role as a possible mediator will be significant in combating these issues. Lastly, the thesis examines if institutional aspects can aid in the mitigation of CO2 emissions' effect on human development. The contribution of the thesis to the existing body of knowledge on human development and institutional quality by examining which of the six institutional aspects used in the study have the most significant impact in diminishing CO2 emissions impact on human development while accounting for the different inequalities in human development between different countries.

This dissertation makes a two-fold contribution to the intellectual conversation around the energy field. First, it clarifies the complicated and complex impact of institutional quality aspects—which span a range of dimensions—on the development of the electricity industry. This includes a detailed investigation of the various institutional aspects within this context and an analysis of the overall impacts. Second, this study explores the complex web of connections between emissions, energy dynamics, and the expansion of human development. It goes beyond simple observation and attempts to understand the intricate interactions of variables that shape these relationships, focusing on identifying distinctive patterns and dynamics among nations with various income levels. This thesis further contributes to the literature by linking Rostow’s five stages of growth theory and the emissions-growth-institutions nexus. This comprehensive analysis deepens our understanding of the energy industry and sheds important light on the distinct opportunities and problems countries face at different economic development stages.