The resource hypothesis revisited: Analysing the OECD experience in energy sustainability

Abstract

This study examines the impact of natural resource wealth on energy sustainability, with a particular focus on the moderating role of government environmental protection expenditure (GEPE). Using data from 30 OECD countries spanning 2000–2022, the analysis employs advanced econometric methods including Driscoll-Kraay (DK) standard errors, the Instrumental Variable Generalised Method of Moments (IV-GMM), and the Dynamic Panel Threshold Regression (DPTR) model. The findings reveal a nuanced relationship between natural resource wealth and energy sustainability. Initially, resource wealth exhibits a negative correlation with energy sustainability. However, beyond a critical threshold of 35.2 %, this relationship reverses and becomes positive. This turning point underscores the dual nature of natural resource wealth, which can act as either a curse or a blessing, depending on how effectively it is managed and the scale of revenues it generates. The results demonstrate a U-shape relationship between natural resource wealth and energy sustainability. Furthermore, the study finds that when natural resource wealth interacts with GEPE, it positively impacts energy sustainability. Based on these findings, policymakers should focus on increasing allocations to GEPE to fund renewable energy projects and enhance energy sustainability while establishing robust governance frameworks to manage resources wealth efficiently.