Climate Vulnerability and Renewable Energy Consumption: The Moderating Role of Financial Development

ABSTRACT This study investigates the nexus between climate vulnerability (CVUL) and renewable energy consumption (RECO) and tests the moderating effect of financial development (FD) on this relationship. The analysis is, particularly, relevant for the 162 panel countries observed between 1995 and 2022, which face diverse climate risks and exhibit different levels of FD—factors that critically shape their ability to transition toward sustainable energy systems. By employing a quantile regression (QR) methodology, a positive relationship between CVUL and RECO has been found across all quantiles. The QR findings reveal variations in the impact of CVUL on RECO across different quantiles. Furthermore, the results suggest that FD moderates the relationship between CVUL and RECO, with the moderation effect being strongest at lower quantiles and less pronounced at higher quantiles. These findings remain robust across various econometric methodologies as well as across different country subsamples. The findings highlight the critical role of FD in moderating the nexus between CVUL and RECO. This evidence provides actionable insights for policymakers across varying development contexts, underscoring the need to align financial systems with renewable energy goals to enhance climate resilience and advance progress toward sustainable development goals.