Catalysts for sustainable energy transitions: the interplay between financial development, green technological innovations, and environmental taxes in European nations

Abstract

The shift towards environmentally friendly and sustainable energy sources has become crucial due to global warming and increasing environmental concerns. To facilitate this transition, policymakers need to understand the factors that influence it. Thus, this study examined the role of financial development, green technological innovations, and environmental taxes on energy transitions in the case of Europe nations by utilizing the data from 1995 to 2015. Our results from FMOLS and DOLS approaches showed that financial development and green technological innovation have a positive and significant relationship with the energy transition, while environmental taxes have a negative but significant connection. Similarly, economic growth has a positive and significant effect on environmental taxes. Moreover, the findings of MMQR revealed that financial development and green technological innovations are significant till the 80th quantiles. Similarly, carbon emissions are significant at all quantiles, while environmental taxes are significant at the 80th and 90th quantiles only. Likewise, economic growth showed a significant connection from the 40th to 90th quantiles. Similarly, the causality analysis showed that financial development, green technological innovations, and carbon emissions have a bidirectional relationship with energy transition. This study has significant importance for the policymakers and government of European Unions.