Institutional Quality, Energy Transition and Environmental Sustainability in CIS Countries: Panel Evidence for SDG13

Abstract

This study investigates how institutional quality conditions the relationship between energy transition and environmental sustainability in nine CIS economies over the period 1996–2024, drawing on annual panel data sourced from the World Development Indicators. In the empirical framework, carbon dioxide emissions are specified as the dependent variable, while industrial output, foreign direct investment (FDI), renewable energy consumption, economic growth, trade openness, overall energy use, and an institutional quality index are included as key determinants of environmental pressure. Methodologically, the paper employs second-generation panel econometric techniques, commencing with cross-sectional dependence diagnostics and panel unit root tests, and proceeding to long-run estimation through FMOLS and CCR. The robustness of these estimates is reinforced using Driscoll-Kraay standard errors, while the System-GMM estimator is applied to address heteroskedasticity, serial correlation, cross-sectional dependence, and endogeneity concerns. The results indicate that industrial activity, energy consumption, and FDI significantly increase CO2 emissions, whereas greater reliance on renewable energy and stronger institutional quality help to alleviate environmental degradation. Under more rigorous specifications, trade openness and economic growth are found to reduce emissions, pointing to emerging decoupling patterns within CIS countries. Importantly, the interaction between renewable energy and institutional quality reveals a pronounced complementary effect, suggesting that stronger governance frameworks amplify the environmental benefits of energy transition. Taken together, the findings underscore that environmental sustainability across CIS economies is jointly determined by structural, economic, and institutional factors, with institutional quality serving as a critical lever for advancing progress toward SDG 13.