Financial access, depth, and efficiency: The key pillars for enhancing energy equity, security, and sustainability

Abstract

Access to affordable, equitable, and sustainable energy is essential for countries to achieve the Sustainable Development Goals through financial resources. In a critical era for sustainable energy, exploring the relationship between financial development and energy trilemma indicators, i.e., energy equity, security, and environmental sustainability, is imperative. To comprehend this, the present study examines the impact of financial market and institution accessibility, depth, and efficiency on energy trilemma indicators in 18 emerging economies between 2011 and 2021 using the Generalized Method of Moments (GMM) model. The study highlights that energy equity is positively impacted by financial market accessibility and institutional efficiency. Furthermore, it confirms that the depth and efficiency of the financial markets, as well as the development and accessibility of financial institutions, significantly reduce greenhouse gas emissions. However, financial market development negatively impacts wind energy. These unfavorable results are caused by uncertain government regulations, inadequate infrastructure, expensive upfront investments, prolonged payback times, and environmental and other economic challenges. These challenges reduce the financial feasibility of energy-efficient projects, especially in developing nations where overcoming financial and technological barriers requires targeted solutions and supportive policies. Hence, policymakers must develop robust strategies that promote alternative energy sources to address climate change.