Effect of Country Governance on Cross-Border Renewable Energy Investment and Climate Actions in Emerging Countries

ABSTRACT

This study investigates the effect of country governance on climate actions, specifically climate-change mitigation and adaptation, through cross-border renewable energy investment (CB-REI). Using data from 74 emerging countries from 2008 to 2019, we find that the control of corruption, regulatory quality, citizens’ voices and accountability are the key governance pillars that attract CB-REI, which enhances climate actions. Heterogeneity analyses reveal that the CB-REI channel effect is more evident in countries with higher governance quality and carbon emission levels. This study offers policy implications pertaining to governance-related obstacles for CB-REI in emerging countries and their transition toward low-emissions, climate-resilient pathways.

KEYWORDS:

• Governance
• cross-border renewable energy investment
• climate change mitigation
• climate change adaptation

JEL:

• O13
• P45
• P48

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2023.2247139.

Notes

1. We thank the participants of the 35th Asian Finance Association Annual Conference, which was held in Ho Chi Minh on June 26–27, 2023, for their suggestions on improving the identification of the system of equations.

2. A reverse causation between CB-REI and economic growth, as well as the unemployment rate, is possible, given that foreign capital has long been observed to significantly impact a country’s economic development (Borenzstein, Gregorio, and Lee 1998; Griffin 1970).

Additional information

Funding

The work was supported by the Ministry of Higher Education Malaysia under the Fundamental Research Grant Scheme (FRGS) [Ref. No.: FRGS/1/2022/SS01/XMU/02/2]; Guangdong Basic and Applied Basic Research Foundation (Grant No.: 2022A1515110280); Xiamen University Malaysia Research Fund (Grant No.: XMUMRF/2021-C8/ISEM/0033).