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Abstract

This study examines the potential links between financialization (environmental tax (TX), foreign direct investment (FDI), and financial development index(FD)) and energy transition (ET) while accounting for service value-added (SV), infrastructure development (INF), and gross capital formation (INV) in 39 developing economies from 2000 to 2021. It uses the Two-step difference Generalized Method of Moments (GMM) and Panel Quantile regressions. The result of financialization in energy transition reveals a mix of outcomes; TX has a positive connection with ET while FD has a negative connection with ET for all the models. On the other hand, outcomes from FDI indicate a positive and significant connection with the ET for Models 1, 2, and 4, while Models 3 and 5 show a negative significant connection with energy transition. Regarding interaction terms, FDI*INF has a positively significant connection with ET, while TX*INF has a negatively significant connection with ET. These results culminate in the formulation of policy guidelines orientated toward SDGs, precisely the strategic policy for addressing SDG-7 and SDG-13. The study advocates that the sampled countries undertake measures to expedite the ET process by enhancing instructional development and investment while instituting an effective environmental taxation regime.