How social imbalance and governance quality shape policy directives for energy transition in the OECD countries?

In line with the COP26 Summit objectives, this paper develops a policy framework to achieve energy transition by considering the social imbalances and regulatory effectiveness. A new energy transition index is proposed. It is an output-side indicator based on the energy ladder hypothesis. This index enables to apprehend the energy transition scenario in any country by capturing (a) the transition to a cleaner energy source, and (b) the transition to more energy efficient sources. Using the two-step System GMM approach and data for 37 OECD countries over the 2000–2019 period, the dynamic and extreme marginal impacts of energy transition drivers with respect to estimates of the model parameters are analyzed. The results show that the social imbalance dampens the positive impacts of energy transition drivers, whereas governance quality helps in augmenting those impacts. The outcomes, drawn from a scenario-based policy design approach, are particularly helpful in advancing potential policy discourse. They have important practical implications for the development of the SDG-oriented policy framework, with special focus on the attainment of the SDG 7 and 13.