Towards Green Transition: Role of Environmental Policy Stringency for Energy Transition in Realizing SDGs 7 and 13

Abstract

Environmental sustainability has remained the main goal of the policy agenda in G7 economies, where the current priority of energy policy reforms is to minimize reliance on fossil fuels, which have significant environmental impacts, and to transition to cleaner energy sources. This research expands the discussion by considering data from 1990 to 2022 and identifying possible determinants of environmental quality using the method of Moments Quantile Regression (MMQR). Therefore, the study examines how environmental policies moderate the energy transition (ET) and CO 2 emissions, and the dynamic influence of technological innovation (INV), financial development (FD), financial globalization (FG), and economic growth (EG) on CO 2 emissions in the G7 economies. The findings reveal that promoting renewable energy and introducing new technologies have a positive impact on environmental sustainability, particularly in reducing carbon emissions. Financial development and globalization support environmental quality, whereas economic growth is strongly detrimental to the environment in G7 developed economies. Based on these insights, this study offers critical, multidimensional policy avenues to achieve Sustainable Development Goals (SDGs) 7 and 13, toward carbon pricing and cap‐and‐trade systems that increase in stringency as the economy grows, ensuring the energy transition away from fossil fuels. Consequently, G7 authorities should require uniform disclosure of Environmental, Social, and Governance (ESG) factors, redirect foreign direct investment (FDI) and domestic portfolio allocation from carbon‐intensive industries to clean energy, and incorporate sustainability into national procurement and industrial strategies to mitigate the environmental impact of economic growth.