How governance and technology shape renewable energy development in hydrocarbon-dependent economies?

Abstract

OPEC economies, deeply reliant on hydrocarbons, face significant challenges in navigating the global shift toward sustainable energy. While this shift is widely discussed in academic and policy arenas, limited attention has been devoted to the institutional and technological mechanisms that drive it, particularly within the OPEC context. This study addresses this gap by examining the institutional and technological determinants of sustainable renewable energy in OPEC countries from 1990 to 2023.

A composite governance index is developed using Principal Component Analysis (PCA) on the six World Bank governance dimensions, complemented by a proxy for digital infrastructure to capture technological readiness. The analysis employs the Method of Moments Quantile Regression (MMQR) to account for distributional heterogeneity in renewable energy output. The results, quantified across the distribution, reveal that governance quality exerts a consistently positive and increasingly significant effect on renewable deployment, with stronger effects observed at higher quantiles. Similarly, technological adoption shows a positive and escalating impact, becoming economically meaningful only among higher-performing countries, where its coefficient reaches approximately 0.49 at the upper quantile. In contrast, energy consumption exhibits a significant negative effect that intensifies at higher performance levels, with its coefficient declining from −0.001 at the lower quantile to −0.009 at the upper quantile. Agricultural growth also demonstrates a pronounced adverse influence in higher-performing contexts, shifting from a weakly positive association at the lower tail to a clearly negative effect at the upper tail. Industrial growth transitions from a negligible role at lower quantiles to a strongly supportive one at higher levels of renewable deployment, while CO₂ emissions demonstrate minimal and inconsistent explanatory power throughout the distribution. The findings highlight the need for a holistic energy strategy in OPEC countries that integrates governance, technology, and sectoral priorities. Strengthening regulatory quality, enhancing technological readiness, and reforming energy subsidies are essential to advance renewable deployment. Sector-specific measures in agriculture and energy-efficient technologies in industry—can further support a sustainable and resilient energy transition.