Sustainable energy transition impact on economic growth in E7 economies

Abstract This paper investigates the impact of sustainable energy transition on economic growth in E7 economies, along with the effects of trade openness, human capital development, capital formation, and labour force participation from 1999 to 2023. Using the Driscoll–Kraay standard error model, findings indicate that human capital development, capital formation and labour force participation have positive influences on economic growth. Renewable energy transition and trade openness, on the other hand, have been found to exert a negative influence. Cross-robustness checks produce results that confirm the test robustness given through FMOLS and DOLS. The Dumitrescu–Hurlin Panel Causality Tests identified one important relationship between one or more of the variables. These relationships include a one-way causality from renewable energy transition to economic growth and a two-way causality between trade openness and economic growth. The results portray short-term challenges to the E7 in adopting renewable energy provisions and trade liberalisations, but are seen to be worth investments in the development of human capital, physical infrastructure, and labour forces. These findings give policy guidance to these policymakers, balancing between economic growth and sustainable development goals.