article · Heliyon
An examination of 46 African nations from 2010 to 2020 evaluates how financial development influences renewable energy consumption, accounting for the threshold effects of political conflict. The findings reveal that financial development directly accelerates renewable energy use, while political conflict restricts it. Furthermore, the capacity of financial mechanisms to spur renewable energy is contingent on crossing specific thresholds regarding access to financial facilities and levels of political stability. An analysis of these thresholds indicates that 11 countries in the sample, including Botswana, Mauritius, Cape Verde, Namibia, and Ghana, sit above the political conflict threshold. Consequently, accelerating clean energy transitions requires governments to establish stable environments and supportive safety nets that enable diverse financing models for renewable energy ventures.
Transitioning to sustainable energy requires considerable investment, but political instability can derail the impact of capital. By identifying the stability thresholds required for financial development to effectively drive renewable energy adoption, this analysis helps policymakers and international finance institutions understand where clean energy investments are viable and where political risk must first be addressed.
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In order to shed empirical light on the impact of the multi-dimensional decomposition of financial development indicators on renewable energy usage, this study investigates the threshold effect of political conflict on finance-energy dynamics in Africa. The research output relies on a panel of 46 African nations from 2010 to 2020, using IV-GMM estimators that are robust to cross-sectional dependence and allow for heterogeneous slope coefficients. The results of direct, indirect, and threshold equations show that i.) Financial development indicators spur renewable energy consumption, while political conflict drags it. ii.) There is a threshold at which financial development could spur renewable energy in some regions of Africa, and the tendency of financial development to maintain such capacity is conditioned on the accessibility of financial facilities and political conflict/stability within a specific range of threshold values. iii.) the threshold level assessment shows that 11 countries in the panel, including Botswana, Mauritius, Cape Verde, Namibia, Seychelles, Zambia, Sao Tome and Principe, Gabon, Ghana and Benin Rep., are above the threshold level of political conflict in Africa. From a policy angle, driving up renewable energy consumption in Africa requires the government to provide enabling safety net environment for the diversification of finance options targeting innovative shifts away from traditional energy sources to the expansion of alternative renewable energy ventures.
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DOI: 10.1016/j.heliyon.2023.e14155
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