The role of renewable energy consumption and institutional quality level in promoting environmental sustainability among developing countries: A dual pathway to unveil environmental Kuznets curve (EKC) dynamics

Economic growth in developing economies often coincides with rising environmental degradation, leading to heated debate over whether current growth pathways are environmentally sustainable. While previous studies have examined the nexus between growth and emissions, limited attention has been paid to determining the threshold level beyond which growth improves environmental quality, or to explaining how renewable energy consumption and institutional quality shape this pathway. This study, therefore, addresses this gap by examining the GDP per capita threshold at which CO 2 emissions begin to decline, while assessing whether renewable energy consumption and institutional quality mediate and moderate this relationship. Using panel data from 77 developing countries spanning 2000-2023, the study employs the cross-sectional augmented autoregressive distributed lag (CS-ARDL) and dynamic panel threshold (kink) models as the main econometric approaches. The findings indicate that renewable energy consumption plays a mediating role in explaining the growth-emission nexus among developing countries. Second, there exists a threshold level of GDP per capita ($4,230.18), beyond which its further growth significantly reduces CO 2 emissions. Third, that institutional quality moderates the nexus between growth and emissions by accelerating the attainment of the EKC turning point, estimated at $2.465.13. The findings highlight the importance of scaling up investment in renewable energy and strengthening institutional quality frameworks (political, economic, and regulatory institutions) to align economic growth with environmental sustainability. Policies geared towards the development of human capital, such as education and skills development, are essential to help developing countries surpass the identified threshold level and improve environmental quality.