How social imbalance and governance quality shape policy directives for energy transition in the OECD countries?

In line with the COP26 Summit objectives, this paper develops a policy framework to achieve energy transition by considering the social imbalances and regulatory effectiveness. A new energy transition index is proposed. It is an output-side indicator based on the energy ladder hypothesis. This index enables to apprehend the energy transition scenario in any country by capturing (a) the transition to a cleaner energy source, and (b) the transition to more energy efficient sources. Using the two-step System GMM approach and data for 37 OECD countries over the 2000 – 2019 period, the dynamic and extreme marginal impacts of energy transition drivers with respect to estimates of the model parameters are analyzed. The results show that the social imbalance dampens the positive impacts of energy transition drivers, whereas governance quality helps in augmenting those impacts. The outcomes, drawn from a scenario-based policy design approach, are particularly helpful in advancing potential policy discourse. They have important practical implications for the development of the SDG-oriented policy framework, with special focus on the attainment of the SDG 7 and 13.


Introduction
The problem of rising emissions across the world is compelling the policymakers to introduce transformation in the economic growth pattern.Predominantly, this economic growth is achieved by consuming fossil fuel-based energy solutions.Oxidation of fossil fuel-based energy solutions is creating carbon dioxide and other greenhouse gas emissions, which are responsible for the global climatic shift.Addressing this global issue requires a radical shift in the economic growth drivers, especially in the energy consumption pattern.This expected transformation might be a necessary step towards attaining the objectives of the Sustainable Development Goals (SDG).The SDG dashboard shows difficulty faced by the countries in attaining the SDG objectives, particularly for SDG 7 (Fig. 1).The recent Energy Progress Report 2022, published by the World Bank (2022), also illustrates that most countries are still not on track to achieve the SDG 7 objectives.Having policy-level lacuna in achieving clean and affordable energy solutions might not only create the issues of rising emissions, but also the issue of energy security.The prevailing energy consumption pattern being the vulnerability of the economies towards energy security has been discussed during the COP26 Summit (Torkington, 2022).At the same time, energy security issues have been synonymously used with climate security issues (Vetter, 2022).Hence, a revamp in the global energy consumption pattern is necessary for reducing environmental degradation and energy security issues.This revamp might be possible through the energy transition.The flagship report of International Energy Agency on Net Zero by 2050 talks about the benefits of embracing energy transition (IEA, 2021a).The International Labor Organization has also talked about the potential benefits of energy transition during the COP26 Summit, while discussing the Just Transition process (ILO, 2021).Therefore, it might be safe to assume that the policymakers around the world need to achieve energy transition to attain the SDG objectives.This argument builds the foundation of the present study.
The necessity of energy transition for the attainment of the SDG objectives can be discussed in line with SDG 7 and 13.While energy transition can help in accomplishing the clean and affordable energy objectives, the shift in the energy sources can help in reducing the environmental degradation.The recent Sustainable Development Goals Report 2022 shows that various economically advanced economies are faltering in attaining the objectives of these two SDGs, and the OECD countries are not an exception (United Nations, 2022).This issue also surfaced during the COP26 Summit.The discussions on the possible mitigation and the adaptation activities were on similar lines with the Investing in Climate, Investing in Growth report published by the OECD four years before (OECD, 2017).This report discussed the benefits of energy transition in handling the energy security and environmental degradation issues in these countries.The COP26 Energy Transition Council stressed embracing the energy transition process for complying with the Paris Accord (Kumar, 2021).This process might require phasing out of the coal-powered plants and financing the renewable energy solutions.Financing these projects might require innovative financial solutions.The COP26 Summit stressed on the climate adaptation financing through the carbon tax mechanism (Environmental Defense Fund, 2021).As carbon tax follows the Pigouvian Taxation process, it can solve the environmental degradation issue by taxing the emissions, while the tax revenues collected in this process can be utilized to finance the energy transition projects.This mechanism can enable the countries to achieve climate resilience by achieving the low-carbon energy transition (Saleheen, 2021).These tax revenues might be channelized towards the technological developments necessary for achieving the energy transition.The role of environmental technologies in building climate resilience was rediscovered during the COP26 Summit.Several policymakers recognized the role of environmental technologies in achieving the energy transition (Liou, 2021).Hence, both the roles of environmental taxes and environmental technologies need to be redefined for achieving the energy transition in the OECD countries.The new energy transition policies should consider these two aspects as major drivers of energy transition.This argument extends the foundation of the present study.
However, proper implementation of the energy transition policies requires social stability within the nation.A recent report by the International Monetary Fund has shown how the prevalence of inequality can hinder climatic policies (Guivarch et al., 2021).This report resonates with the findings of a World Bank report, which shows the possible inefficacy of the economic policies in the face of rising poverty (World Bank, 2020).On a similar context, the Sustainable Development Goals Report 2022 shows the inability of the OECD countries to tackle the rising inequality.It might create a predicament on the way of implementing energy transition policies.Rise in the inequality in wealth distribution might reduce the demand of the sophisticated renewable fuels and increase the demand of the fossil fuels.This might defeat the entire purpose of the energy transition.This preference over fossil fuels during rising inequality scenario might also reduce the impact of the other drivers of energy transition.The concept of Vicious Circle of Energy Poverty conceptualized by Sinha et al. (2022a) can explain this phenomenon by conceptualizing the association between inequality in energy intensity and inequality in income generation through job market.In a study by Saha et al. (2022) the moderating role of gender inequality in shaping the eco-innovation policies for green growth in the OECD countries is analyzed.The study by Sinha et al. (2022b) shows how the social inequality arising out of disproportionate income distribution can deter the positive environmental externalities of energy innovation.Now, along with the energy transition, the incidents of social imbalance will be a concern of the policymakers, as prevalence of social imbalance might hamper the efficacy of the other economic policies.The choice of fuel within an economy can be largely explained by its societal structure, and the Energy Ladder Hypothesis can explain this.The studies by Lee (2013), Hanna and Oliva (2015), Behera et al. (2017) show how societal upliftment changes the patterns of energy consumption in households.Taking a cue from this hypothesis, the overall energy consumption pattern of a nation is assumed to undergo a transition with economic development, and consequential social upliftment.In this context, the role of governance might help policymakers in enforcing the laws and legislations.In the background of the COP26 Summit, the ministers of the United Kingdom have talked about the collective action and accountability necessary for the improving the policy climate in the countries (UK Parliament, 2021).The same has also been discussed by the Council on Foreign Relations during the COP26 Summit.The discourse focused on the role of governance in tackling climatic shift and the energy future of the nations (Betts, 2021).This discourse ideates the possible role of governance in shaping the future of energy transition.Hence, the policy directives need to take account of the possible moderation effects exerted by the social imbalance and governance in shaping the role of energy transition drivers.Therein lies the focus of the present study.
The sustainable energy future of the OECD countries depends largely on how the energy transition efforts are mainstreamed in the policy directives.Boosting the energy transition might entail calibration of those drivers via policy realignment.However, this realignment also needs to contemplate on the negative environmental externalities exerted by the social imbalance and the positive environmental externality exerted by the governance structure.As the OECD countries have failed to honor their Paris Club commitments, initiating energy transition can be the only answer to the policy-level issues faced by them.Academic literature has rarely focused on the policy issues faced by the OECD countries in the way of achieving the energy transition, while the policy gap exists in the policy literature.From this debate, the research question of the present study can be formulated as the following: Research Question: How the Policy Directives for Energy Transition in the OECD countries are shaped by the moderation of Social Imbalance and Governance Quality?
This research question shows the need for a realigned energy policy framework in the OECD countries.The discourse of the energy and climate policies in the OECD countries indicates the need to internalize the moderating factors of the policy determinants within the policy framework.This internalization requires a revamped energy policy framework for the OECD countries.This new policy framework will not only help the OECD countries in attaining the energy transition, but also in accomplishing the objectives of SDG 7.With this policy-level objective, the present study aims at analyzing the drivers of energy transition and its moderators for 37 OECD countries over 2000-2019.The results of the analysis might help in developing the intended new energy policy framework.This policy framework is given a generalized shape so that it can be used as a benchmark policy framework for the other countries, as well.The contribution of the present study lies in (a) developing a new energy policy framework for the OECD countries to help them attaining the SDG objectives, and (b) enabling the other countries to achieve the SDG objectives by endowing them with a benchmark policy design.Now, achievement of these objectives will entail the utilization of suitable methodological adaptation, along with proper measurement of the constructs.Actualizing these two aspects will ascertain the robustness of the policy design.In this quest, a new Energy Transition Index is developed and recommended in the present study.Following the fundamentals of the Energy Ladder Hypothesis, this index has focused on the actual output of the energy transition process, while the literature has stressed majorly on the demand side aspects.This index enables us to build the energy transition scenario in any country by capturing (a) the transition to a cleaner energy source, and (b) the transition to more energy efficient sources.It has utilized the actual energy consumption of the countries over a time frame, and introducing this measurement is the theoretical contribution of the present study.Besides this, the method developed in this study captures the effects of the unobserved policy dimensions, which potentially induces endogeneity bias in the outcomes.The Two-step System Generalized Method of Moments approach is used for empirical analysis.Amidst the family of instrumental variable regression methods, this method is superior in handling the issues endogeneity bias.Thus, the methodological adaptation suits the research objective.
The empirical results show that the social imbalance dampens the positive impacts of energy transition drivers, whereas governance quality helps in augmenting those impacts.The dynamic marginal impact analysis reveals the gradual improvement in the impacts of energy transition drivers.Moreover, the extreme marginal impact analysis suggests that the legal enforcement might have a better edge over the corruption control in ensuring energy transition under the extreme conditions.The theoretical contribution of this study lies in introducing the new Energy Transition Index in the energy economics literature.In terms of policy implications, this study's outcomes have helped in developing an SDG-focused policy framework for the OECD countries to achieve the objectives of SDG 7 and 13.This policy framework can be utilized for other countries to achieve the SDG objectives, while in keeping with the COP26 commitments.
The remainder of the paper is organized as follows.Section 2 briefly reviews the literature.Section 3 describes the methodological framework used to develop the policy framework.Section 4 reports and discusses the empirical findings.Section 5 concludes the paper and suggests some theoretical and policy implications.

Literature review
Modern world is handicapped without continuous supply of energy.Energy is the lifeblood of the global economy.However, unsustainable means of fulling the energy needs have made irreversible damage to the planet.The survival of future generations is threatened with the rise of greenhouse gas emissions, rising temperatures, and increased presence of toxic chemicals in the air and water.Twenty first century started with a great increase in awareness about the climate change issue among the masses.Various stakeholders including the public demand for taking climate change risk mitigation actions (Tiba and Belaid, 2020).Currently, transition from traditional to more sustainable energy resources is one of the main elements of international political agenda.Energy transition has become a grand challenge recently due to disruptive geopolitical events.Nations across the globe are struggling to achieve Sustainable Development Goals (SDGs).The major impediment nations face today is transitioning towards more sustainable energy resources (Chishti et al., 2023).
To achieve the SDGs and tackle the growing pressure to contain environmental pollution, the transitions towards renewable energy generation and use is inevitable (Awijen et al., 2022;Belaïd et al., 2021;Belaïd and Zrelli, 2019).It is an undeniable fact that energy transition can improve the environmental quality and energy efficiency.Recent anecdotal evidence shows that excessive reliance on fossil energy sources has negative effects on the socio-economic growth of countries due to supply chain issues (Olson and Lenzmann, 2016).A nation can achieve the goals of sustainable socio-economic growth by transiting towards sustainable energy generation.However, a path was to achieve this transition to more sustainable energy resources is not straightforward.This transition requires some important elements to be developed.These elements are discussed in the sub-sections.

Environmental technology & energy transition
There are great many environmental concerns related to the use of fossil fuels as a source of energy generation.This motivates the use of renewable resources to be used as energy generation input.However, generation and use of renewable resources for energy generation and bring a larger share of renewable energy in the world energy mix poses many technological challenges including energy storage (Gallo et al., 2016).Every nation needs to innovate and develop efficient energy systems to embrace the renewable energy transition (Kittner et al., 2017).Environmental technology development is a key ingredient to efficient energy system development.Environmental technologies enable countries infrastructure to facilitate generation and use of clean energy.In this vein, Bayulgen (2020) recently studied the socioeconomic drivers of energy transition and argue that development of environmental technologies is a main driver of the smooth transition of A. Sinha et al. energy from traditional to renewable resources.Similarly, other extant literature supports this view that environmental technology is one of the main determinants of energy transition (see for review, Chien et al., 2021;Aklin and Urpelainen, 2018;Baker et al., 2014;Aklin and Urpelainen, 2013).More recently, the European Environment Agency stressed that environmental technology innovation is essential to improve environmental quality and ensure more responsible as well as efficient utilization of natural resources (European Commission, 2011).
In line with the anecdotal evidence and prominent literature dealing with determinants of the energy transition, the technological advancement of a country can be hypothesized to have significant positive impact on the energy transition.

Environmental tax & energy transition
The role of formal and informal institutions in bringing change has long been acknowledged in literature.The role of formal institutions is to provide a policy framework that facilitates the implementation of certain strategies.Additionally, formal institutions provide financial support in the form of subsidies to the consumers for promoting the use of socially desirable products.These subsidies are part of fiscal spending which governments collect in the form of taxes.Environmental (carbon) tax is a recent fiscal policy tool used by the governments to discourage the use of fossil fuel-based energy solution and improve the use of clean energy.Corporations across the globe are the biggest consumers of resources including environmental resources (Hussain et al., 2018).Therefore, industrial corporations must be held accountable for harming the natural environment.At the same time bringing corporate change will speed-up the process of energy transition.Furthermore, environmental tax helps governments to invest in pro-environmental projects.
Based on the empirical evidence present in the literature, it can be hypothesized that environmental tax implementation might significantly improve the energy transition of a country.

Globalization & energy transition
The globalization of any economy is a double edge sword for sustainable development.On the one hand it brings opportunities for socioeconomic growth.On the other hand, it leads to significant environmental degradation due to increased production and population (He et al., 2021).Even though globalization put pressure on economy to produce more and use traditional (fossil fuel based) energy sources, it can help economies smoothen their transition towards alternative (renewable) energy sources (Chien et al., 2021).Globalization helps firms open investment avenues for global investors and help economies achieve economic and social Nash-equilibrium (Carfí et al., 2019).Recently, He et al. (2021) note that globalization helps economies contain carbon emission and improve climate performance.Extant literature on the link between globalization and elements of energy transition is divided into two main strands.One strand argues that globalization eliminates the trade barriers of the economy and resultantly increases output, income, and demand for more energy (Rahman, 2020).This leads to environmental deterioration.However, the other strand opposes this view with a claim that globalization is coupled with technological advancements and availability of resources to be invested in environmental innovation which leads to better management of physical resources (He et al., 2021;Shahbaz et al., 2018;Shahbaz et al., 2016).The later strand provides authentic link as globalization improves country's ability to invest in environmental projects and provide enough resources to facilitate the smooth energy transition.
The literature shows mixed evidence on the impact of globalization on the energy transition.With the changing nature of geopolitical scenario, it is necessary to assess this impact in case of an energy transition.Therefore, it can be hypothesized that globalization might have influenced the energy transition.

Educational expenditure & energy transition
The United Nation's sustainable development program set specific goals on education to improve the socio-economic well-being of nations (Niessen et al., 2018).Extant literature on the role of socio-economic growth and renewable energy shows that social and economic growth in the form of improved income level and living standard help limit carbon emissions in the country (Shahbaz et al., 2018).Similarly, innovation which is a latent product of improved education and intellectual capital of any economy helps economies develop sustainable technologies.These technologies potentially ease the path of energy transition (Li et al., 2020).Li and colleagues, in their recent study on eco-innovation among 27 OECD countries show that eco-innovation significantly reduces emissions and promotes use of renewable energy.
The relationship between educational expenditure and ecological fortification has long been established.Therefore, it can be inferred that educational expenditure helps the economies transition to renewable energy sources, and thereby, educational expenditure can be hypothesized to be a determinant of energy transition.

Institutional void, energy transition drivers, and energy transition
Any economy in the world is heavily reliant on industrial growth.Industries are the biggest contributors towards economic growth.Recently Tashman et al. (2019) study the sustainable behavior of multinational enterprises and note that these enterprises do not truly embrace the responsible behavior when operate in weak formal institutional environment.Same conclusion can be drawn from the studies dealing with culture and corporate social responsibility.Similarly, Carley and Konisky (2020) recently argue that energy transition is dependent on energy justice in society.In the presence of income, gender, and other societal inequalities, transition to more sustainable energy is a process far from happening.Moreover, there is a collective understanding and agreement about the role of income equality, social equality, and social justice in the smooth functioning of any economy.
There are still innumerable gaps in understanding about the role of these inequalities in moderating the relationships between energy transition drivers and energy transition.Thus, it can be hypothesized that the consideration of these gaps as important moderating factors can unveil the mystery of achieving energy transition.

Research gap
A brief review of literature indicates the impacts of several policy instruments on the energy transition.However, these impacts are inconclusive in terms of their magnitude and direction.This leaves two questions before the policymakers: (a) What exactly is measured in the energy transition, and (b) Why the policy instruments behave differently in different contexts?These two questions lead to two research gaps identified in the present study: a.What needs to be measured in the energy transition?b.Are the determinants of energy transition subject to moderation?
The contribution of the present study lies in developing an SDGoriented policy framework for the OECD countries by addressing these two research gaps.

Theoretical model
The energy transition is an integral component of achieving sustainable development, and to be specific, SDG 7 and 13 (Elavarasan et al., 2023).The accomplishment of energy transition can improve the energy efficiency and environmental quality of a nation.Following the A. Sinha et al. discourse of COP26 Summit, the ongoing technological advancements might play a major role in realizing this accomplishment.Improvement in energy efficiency and betterment of the environmental quality require technological advancements to be pro-environmental, and therefore, these technologies are largely referred to as Environmental Technologies.Yet, it is noteworthy to mention that mere adaptation of Environmental Technologies might not be sufficient to bring energy transition to a nation.Imposition of Pigouvian Taxation might discourage the industrial sector from degrading the environmental quality.The prevalence of such a strict taxation regime helps in reducing the usage of dirtier energy solutions and encouraging the adoption of cleaner energy solutions.For the energy transition process to be effective, nationwide deployment and diffusion of cleaner energy solutions are necessary.These projects are capital intensive and might require additional financial support, apart from domestic Investments.The technological adoption and enforcement of the taxation regime improve the potential of these projects, thereby making these projects lucrative investment destinations.The rise in the attractiveness of these projects might open avenues for international investments.The investments might be in terms of technological or financial capital.Globalization might help these countries in receiving such investments for these projects, and hence, channelizing the capital via globalization route might boost the energy transition in these economies.Now, the institutionalization of these processes requires the strengthening of the educational infrastructure of these nations.The policymakers might need to increase the education budget for boosting research and development towards achieving energy security.This rise in the education budget is reflected in their education expenditure.This reflects the public policy orientation of a nation towards strengthening the educational infrastructure of a nation for achieving energy transition.
At the same time, developmental progress of a nation necessitates a socio-cognitive balance and legislative stability within the nation.In the presence of any kind of imbalance, the policies might miss their desired direction.The same is true for achieving energy transition, as well.In presence of the imbalances arising within the country might hinder the progress of energy transition by hindering the effectiveness of the policies.The social imbalance might arise out of the prevailing income or wealth inequality in the nation, whereas the cognitive inequality might arise out of the gender disparity.The persistence of these inequalities might create barriers in the way to achieve energy transition.However, presence of strong governance in the form of institutions might ensure a transparent and stringent enforcement of the legislations, while protecting the constitutional and judicial rights of the citizens.This presence of good governance might nurture the climate of energy transition within a nation.
Based on the brief theoretical underpinning, the functional form the energy transition can be articulated as the following: Following the theoretical model, the testable empirical model for country i and time t can be presented as: Model 1: The effectiveness of the environmental technologies and other factors are conditional upon the prevailing social and regulatory situation.The policy instruments can ensure a successful energy transition under favorable social balance and effective regulatory framework within the geographical boundary of a nation.Hence, these conditional elements can determine the full potential of the policy regime to achieve Energy Transition.Hence, the empirical model should take account of the moderation effects of these social and regulatory indicators.These moderation impacts within the empirical model can be represented as: Model 2: The marginal impacts of the policy instruments in the form of elasticities can be expressed as: Based on these marginal impacts stated in the form of elasticity of the energy transition with respect to the model parameters, certain conditions emerge.These conditions can show the different likelihoods of the moderation impacts, as stated below: The three conditions depict three different scenarios for moderation impacts.Condition 1 shows the ineffectiveness of the governance quality in boosting energy transition.This condition shows that better energy transition can be achieved without any kind of moderation.This is possible only when the negative externalities exerted by the inequality indicators are more than the positive externalities exerted by the governance quality.This scenario is undesirable for the policymakers, A. Sinha et al. and hence, occurrence of such a condition will need immediate policy action.Condition 2 shows how effectively the governance quality can catalyze the energy transition, by surpassing the demeaning impacts of the inequality indicators.A country with such a condition will require minimal or no policy intervention.Lastly, Condition 3 shows the threshold condition, based on which it might be difficult to determine the possible direction of the moderation impacts.Taking any policy intervention might lead to uncertain or unforeseen impacts of the core policy determinants of energy transition.

Construction of energy transition index
Energy transition in any context corresponds to (a) evolution from fossil fuel to renewable energy sources, and (b) evolution towards more efficient energy solutions.A combination of these two aspects implies rising along the energy ladder.In this process, a nation will always be in pursuit of renewable and more efficient energy solutions.This evolution towards cleaner and efficient energy solutions might be referred to as the Energy Transition.
In academic and policy literature, the first such index was developed by the World Economic Forum (Singh et al., 2019).The Energy Transitions Index developed by them was a preliminary effort to encompass the policy perspectives responsible for the energy transition.This index is based on the structural execution and transition inclination of a nation, while equally weighing all the explanatory dimensions.Despite the potential applications of this index, it obtained criticisms from the academic researchers because of its structural issues, and thus, leading to the modification of this index (Neofytou et al., 2020).Yet, the revised version of the index was also unable to capture the fundamental features of the energy transition, i.e., what is the exact level of energy transition achieved by the countries.The newly developed Energy Diversification Index by Gozgor and Paramati (2022) was an attempt to fill this gap.However, the major problem with this index has been its focus on aggregation/segregation of sources, rather than prioritizing them.This index majorly captured whether the energy is generated from a single source or from diversified sources, notwithstanding the environmental impact of that source.The present study aims to address this shortcoming by recommending a simplified and straightforward index to portray the movements of countries along the energy ladder.This index has been referred to as the Energy Transition Index in the present study.This index has drawn its theoretical foundation from the working principles of the Lilien index, which captures the sectoral shift of the labor force (Lilien, 1982).Following the weightage assignment process being followed in the Lilien Index, the Energy Transition Index can represent the evolution towards cleaner and efficient energy sources by assigning gradually higher weightages to the cleaner and more efficient energy sources (Hu et al., 2022).
The proposed Energy Transition Index has two components for nonrenewable and renewable energy transitions (see Fig. 2).The reasons behind this segregation are (a) the countries relying more on nonrenewable energy solutions can achieve energy transition by choosing the energy solutions with lower carbon content, and (b) the countries relying on renewable energy solutions can achieve energy transition by choosing the energy solutions with higher efficiency.These two components are developed in the first stage of index development.The shift from the nonrenewable to renewable energy sources is captured in the second stage.Following are the development stages of this index: Stage I: Four nonrenewable energy sources are identified, i.e., coal, crude oil, natural gas, and nuclear.Following EIA ( 2022), coal has the highest carbon content, followed by crude oil, natural gas, and nuclear.Consequently, coal bears the lowest weightage, as it should receive the lowest inclination by the policymakers.Going by the same logic, nuclear energy bears the highest weightage.
The component for capturing transition in nonrenewable energy (NRE) has been developed as per the following: Here, n = 1, 2, 3, and 4 indicate coal, crude oil, natural gas, and nuclear, respectively, NR n, t indicates the consumption of n th nonrenewable energy at time t.A higher value of NRE for any country i and time t will indicate transition experienced by the country towards a cleaner nonrenewable energy source.
Stage II: Five renewable energy sources are identified, i.e., biofuels, solar, hydro, geothermal, and wind.The energy efficiencies of these sources are captured.According to a report published by the Brookings Institution (Frank, 2014), the biofuels have the lowest emission reduction capacity, followed by solar, hydro, geothermal, and wind.Accordingly, the lowest weightage has been assigned to biofuels, as it will be given the lowest preference during energy transition.At the same time, being the most preferred nonrenewable energy source, the highest weightage has been assigned to wind.
The component for capturing transition in renewable energy (RE) has been developed as per the following: Here, r = 1, 2, 3, 4, and 5 indicate biofuels, solar, hydro, geothermal, and wind, respectively, R r, t indicates the consumption of r th renewable energy at time t.A higher value of RE for any country i and time t will indicate transition experienced by the country towards an efficient renewable energy source.
Stage III: The individual components for capturing the energy transition within the respective sources are now captured.As a final step, the transition from one component to the other component needs to be captured.The weighted geometric mean of these two components will indicate the energy transition in a country.
The new Energy Transition Index (ET) has been developed as per the following: Here, a and b are respective weightages assigned to NRE and RE.The transitions towards the renewable energy sources are preferable to an economy, and hence, a < b.
Prima facie, the newly introduced Energy Transition Index seems to capture the energy transition scenario of a nation.Nevertheless, it will be ambitious to claim that such a linear index specification can capture the entire transition scenario.There are a few reasons behind this argument.First, the energy transition of a nation comprises of two dimensions, i.e., demand and supply sides.Demand side dimension refers to the readiness of a country in embracing the energy transition, while the supply side dimension reflects the actual output.Coexistence of both these dimensions make the energy transition process non-linear and complex.Encapsulating both these dimensions within the ambit of a single index might not be practicable.The Energy Transitions Index by World Economic Forum captured the demand side dynamics of the energy transition (Singh et al., 2019).Similarly, the Energy Transition Index developed in the present study captured the supply side dynamics, in terms of actual energy transition.Both indices have limitations in terms of the coverage.Saying this, it would be imperative to mention that this index is by far the only available method to capture the energy transition in any nation.There lies the contribution of this index.

Comparison with other energy transition indices
Before the proposed Energy Transition Index is utilized in the empirical analysis, it needs to be put into perspective with respect to other existing indices in the literature.Three indices are chosen to demonstrate this comparison, i.e., the Energy Transitions Index (Singh et al., 2019), the Sustainable Energy Transition Readiness Index (Neofytou et al., 2020), and the Energy Diversification Index (Gozgor and Paramati, 2022).These three indices will be compared with the Energy Transition Index proposed in the present study.
• First, Energy Transitions Index (Singh et al., 2019) 2019) by broadening the aspect of sustainability.By and large, like the Energy Transitions Index, this index also answered the same question.• Third, the Energy Diversification Index (Gozgor and Paramati, 2022) is an extension of the "Diversity of primary energy fuels" under "Energy Access and Security" component of the Energy Transitions Index by Singh et al. (2019).The index is developed using the Herfindahl-Hirschman export diversification index by the World Bank (2013).This index is the first attempt in literature to capture the output side aspects of the energy transition.However, this index simply captured the concentration of the energy sources across the six different sources of energy.Hence, it is nearly impossible to measure whether the countries are moving up the energy ladder in the transition process, or not.In simple words, if a country completely shifts to the renewable energy source, this index will fail to capture it.
The Energy Transition Index proposed in the present study differs from these three indices in the following aspects: • It captures how the transition among energy sources is taking place.
Hence, this index captures the output side aspects, i.e., it captures the expected output of the indices developed by Singh et al. (2019) and Neofytou et al. (2020).This index answers to the question "What is the status of energy transition?" • It addresses the Energy Ladder Hypothesis by assigning higher weightages to the cleaner and more efficient energy sources, and the application of Lilien Index (1982) helps in capturing how a country is annually moving along those sources.These movements are not only from nonrenewable to renewable energy sources, but also (a) from dirtier to cleaner nonrenewable energy sources, and (b) from less to more efficient renewable energy sources.Hence, it complements the coverage of the index developed by Gozgor and Paramati (2022).

Empirical schema
The empirical model being reduced form in nature, it is highly likely that the model might be susceptible to endogeneity bias.Moreover, given many factors having potential impacts on the energy transition, the model might also suffer from the omitted variable bias.The methodological adaptation needs to take account of these measurement issues, so that the recommended policy framework is robust.Two-step System GMM is used to take care of these measurement issues.Use of the instruments and the lagged dependent variable helps in tacking the unobserved endogeneity issues prevailing in the model.
The core of the empirical model is developed with an assumption that social imbalance and governance quality might have a moderating impact on the drivers of energy transition.It has been indicated in terms of the interaction terms in the model.However, the potential impacts of these perceived moderators can be identified by capturing the elasticities of the drivers of energy transition with respect to energy transition.In a regression model, these elasticities assume the Ceteris Paribus condition, which might not be a true reflection of the moderating impacts.As the social imbalance and governance quality are expected to evolve over time, and they might exhibit unforeseen impacts under extreme market conditions, the Ceteris Paribus condition needs to be relaxed.This relaxation encompasses capturing the (a) temporal evolution of the impacts, and (b) tail ends of the impacts.In the first case, the elasticities will be calculated over a period, whereas the second case calls for capturing the elasticities over the entire spectrum of the moderators.Following this discussion, this study has used (a) Dynamic Marginal Impact analysis, and (b) Extreme Marginal Impact analysis.These methods are used to capture the marginal impacts of any policy parameter in presence of the moderation of the inequality and governance indicators.The marginal impact of any policy parameter is captured in terms of its elasticity, given the Ceteris Paribus condition.Henceforth, the marginal impact at any point of time won't undergo a change.However, this impact might show a sign of change if the constancy of temporal frame is relaxed.For simplification purpose, the following functional form is assumed: In Eq. ( 12), X might be considered as core determinant of Y, and (M, N) as the controls.Hence, at time t = t*, the marginal impact of X with respect to Y can be shown as the elasticity of Y with respect to X: Here, M* and N* can be assumed to be the values of M and N, at t = t*.So, the value of a 1 + a 4 M* * N* can remain constant at t = t*.Now, given the dynamism in the economy, this marginal impact might not remain constant.If the marginal impacts are captured at t = (t 1 , t 2 ), then the values of M and N can be (M 1 , M 2 ) and (N 1 ,N 2 ).Under such a scenario, the following conditions might arise: As Condition A resembles Ceteris Paribus condition, it might not be considered for the analysis.However, the remaining three conditions show that the any difference in the values of (M 1 , M 2 ) and (N 1 , N 2 ) will cause the changes in the marginal impact of X.Now, these changes will lead to only two conditions: From the policymaking perspective, it is important to know whether marginal impacts of policy instruments are improving or deteriorating over time, and how are the moderating impacts of the controls shaping these marginal impacts.This can be revealed by calculating these marginal impacts over the study period.In the present study, this analytical procedure has been referred to as the Dynamic Marginal Impact analysis.
By far, the crests and troughs of the controls, i.e., M and N, were not considered in analyzing the marginal impacts.Under extreme conditions, it might be possible that the combinations of the high and low values of M and N are producing dissimilar marginal impacts of X.The marginal impacts arising out of these extreme values of M and N can be thought of as the boundary conditions of the policy regime.Hence, a robust policy design should also consider these extreme conditions, which might be completely different than the business-as-usual (BAU) scenario (Sinha and Rastogi, 2017).
The crests and troughs of M and N are denoted as (M H , M L ) and (N H , N L ).The four quadrants of Table 1 show that the marginal impacts of X with respect to Y will most likely differ in accordance with the extreme conditions.These values of the marginal impacts will be able to demonstrate the boundary conditions of the policy framework.In the present study, this analytical procedure has been referred to as the Extreme Marginal Impact analysis.

Data
The present study is conducted on a sample of 37 Organization for Economic Co-operation and Development (OECD) countries over 2000-2019.Data on various forms of nonrenewable and renewable energy consumption (in Exajoules) have been captured from the British Petroleum (2021).The data on Environmental Patent (proxy for environmental technology) and Environmentally related Tax Revenue (proxy for environmental tax) are extracted from the OECD statistics (OECD, 2022).The globalization index has been taken from Dreher (2006).The data on Palma Ratio (proxy for income inequality) have been extracted from the World Inequality Database.The data on Gender Inequality Index have been collected from the United Nations Development Programme (UNDP).The data on labor force (total), the number of labors in three sectors (agricultural, industrial, and service), and Government expenditure on education as percentage of government expenditure (proxy for education expenditure) have been collected from the World Development Indicators (World Bank, 2021a).The data on governance quality have been collected from the Worldwide Governance Indicators (World Bank, 2021b).
For the robustness check, the data on gross capital formation (constant 2017 USD) have been collected from the World Development Indicators (World Bank, 2021a), the data of gross value added by kind of economic activity have been collected from United Nations Statistics Division (UNSD, 2021), the data on final energy consumption by sector have been collected from International Energy Agency (IEA, 2021b).

Initial model diagnostics
A policy-oriented empirical model might be susceptible to the estimation bias, as the policy parameters might demonstrate multicollinearity.Hence, it is important to check the model fitment before analyzing it.The Lasso and Ridge family of estimators are used to assess this fitment.These estimation algorithms can truncate the coefficients of the less contributing model parameters during the regularization process.The Square Root, Adaptive, Elastic Net Lasso, and the Ridge estimators are used, and the estimation outputs are reported in Table 2.The results recommend non-omission of any model parameters within the framework.To be sure about the parametric selection, the output of the Lasso and Ridge estimation ae verified against the Least Angle Regression method with the Lasso algorithm.This method selects the model parameters until the lowest value of Mallow's Cp is achieved.The estimation output reported in Table 3 confirms the selection of all the model parameters in the model.As a last layer of validation, the multicollinearity statistics reported in Table 4 show that the model parameters are free from the multicollinearity issues.The Chudik and Pesaran (2015) cross-sectional dependence (CD) test results show the model parameters to be cross-sectionally independent.This result permits the application of the first-generation methods.The outcomes of augmented Dickey-Fuller (ADF) (Dickey and Fuller, 1981) and Im-Pesaran-Shin (IPS) (Im et al., 2003) unit root test show the model parameters to be first order integrated, and Pedroni (2004) A. Sinha et al. parameters.Based on the results of these initial model diagnostics reported in Table 4, the estimation process can be initiated.

Estimation of long run coefficients
The long run coefficients of all the model parameters are estimated using the two-step system GMM process, and the estimation results are reported in Table 5.The estimation processes are conducted for Model 1 (without moderation) and Model 2 (with moderation).Both the models are estimated by taking the governance quality measures as (a) the Transparent Laws with Predictable Enforcement and (b) the Absence of Corruption.In this section, only the model outcomes without moderation are considered.
Energy transition in any nation requires technological advancements.These innovations are typically designed to internalize the negative environmental externalities exerted by the economic growth process.So, these technologies are expected to have a positive impact on the energy transition.The empirical results reported in Table 5 substantiate this argument.These technologies help in reducing fossil fuel consumption, improve energy efficiency, and help in the discovery of alternate energy solutions.This aspect has been a major concern for the OECD policymakers in the COP26 Summit (OECD, 2021a).The debates and discussions have been revolving around the possible impact of green innovations and technologies in driving the energy transition in these countries.This result extends the findings of Madaleno et al. (2022) and Wu and Han (2022).These innovative endeavors and technological developments will necessarily entail financial resources.Imposition of a Pigouvian Taxation mechanism might solve two purposes, (a) the negative environmental externalities exerted by the economic growth process will be internalized, and (b) the internalization process will create tax revenues.Now, this accumulated tax revenue might be utilized for financing the energy transition.Therefore, these taxes might have a direct positive impact on the energy transition process in these countries.The results illustrate the encouraging effects of the environmental taxes on energy transition, thereby authenticating the argument.The role of environmental taxes in improving environmental quality and achieving net zero was also discussed during the COP26 Summit (Jelfs et al., 2021).The academic literature has also shown the precedence of this finding (Renström et al., 2021;Zhou et al., 2022).Now, the globalization pattern in the OECD countries has increased the export competitiveness of a product in the international market.Also, the technology and knowledge transfers improve the innovation climate of these countries (Roberts and Lamp, 2022).Demand of more competitive goods and improvement in the innovation climate are expected to encourage the energy transition in these countries.The results corroborate this claim by revealing the positive impact of globalization on energy transition.This segment of the findings extends the results obtained by Acheampong et al. (2021).While fostering innovation, development of the domestic innovation capabilities by encouraging educational attainment is also important for tackling the environmental degradation issues.The role of educational budget in the OECD countries has been discussed in the COP26 Summit for restoring the environmental quality and boosting energy transition (Kwauk, 2021).This indicates an encouraging impact of public education expenditure on the  Socioeconomic stability of an economy is important for moving up the energy ladder in that economy.The studies by Jakob et al. (2014) and Sy and Mokaddem (2022) display that the effective implementation of the climatic policies for boosting energy transition necessitates a conducive social environment.Imbalance of any kind in the social strata might hinder the policy effectiveness.These imbalances might rise because of the class-divide arising out of disparity in wealth accumulation or disregarding the gender aspects in the policy decisions.The presence of these social imbalances might emerge in the form of inequalities, which might create deterrence in the way of energy transition.The prevalence of income and gender inequalities are found to have negative consequences on the energy transition for the OECD countries.Recently, the OECD Green Growth Strategy committee has also acknowledged the need to maintain inclusivity in the green transition process (OECD, 2021b).The report also mentioned the importance of people-centered actions in the policy agenda to achieve the energy transition process.The policy concerns raised by the committee indicates the policy void prevailing in these countries.The results obtained by Duarte et al. (2021) and Vu (2021) corroborate the findings of the present study.Upholding the quality of governance in such a situation might enable these countries to accomplish smooth energy transition.Bringing transparency in the legislative framework and ensuring inclusivity in the decision-making process can build an environment of trust and empathy within the nation.This climate of good governance within a nation is expected to exert a positive environmental externality.The argument put forth by Demos Helsinki, the Finnish Think Tank, stresses on the importance of strengthening public governance to tackle the climate crisis (Leppänen, 2021).In the backdrop of the COP26 Summit, a similar argument has also been made by Eccles (2021).This indicates the role of governance quality in encouraging environmental quality.The findings of the present study indicate that energy transition is encouraged in the presence of the Absence of Corruption and Transparent Laws with Predictable Enforcement.The study by Soroush et al. (2021) has looked into this aspect from the institutional quality perspective, while Chen et al. (2021) has analyzed this aspect from a social trust perspective.Results of the present study validate and extend the findings of both these studies.

Analysis of static marginal impacts
The presence of good governance is important for the energy transition in a nation.The impact of good governance might be visible through its moderating impact on the policy instruments responsible for bringing this transition.At the same time, prevalence of social inequalities might play a significant role in dampening the desired impacts of those policy instruments.Based on the outcomes of Model 2 (see Table 5), the marginal impacts of the Environmental Technology, Environmental Tax, Globalization, and Education Expenditure are computed at the sample means of the Nature of Governance Quality, i.e., Transparent Laws with Predictable Enforcement and Global States of Democracy, income inequality, and gender inequality.Therefore, these marginal impacts are referred to as the static marginal impacts, and they are reported in Table 6.
The marginal impact of Environmental Technology will be analyzed at the beginning.In absence any moderating impact (Model 1), i.e., assuming the Ceteris Paribus condition, the marginal impacts are found to be 1.3901 (the model with Transparent Laws with Predictable Enforcement) and 1.4261 (the model with Absence of Corruption).It can be understood that these marginal impacts might undergo changes under the influence of governance quality and the inequalities (see Eq. 4).This influence can be referred to as the moderation impacts.Eq. ( 8) reveals that the moderating impact of governance quality can be (a) higher than the moderating impacts of the inequalities, (b) lower than the moderating impacts of the inequalities, or (c) equal to the moderating impacts of the inequalities.The marginal impacts of Environmental Technology under the influence of the moderating impacts are found to be 0.9137 (the model with Transparent Laws with Predictable Enforcement) and 0.7245 (the model with Absence of Corruption).The marginal impact of Environmental Technology is found to be deteriorated under the influence of moderation.This situation complies with Condition 1, as deliberated in Eq. ( 8).This indicates that the expected positive impact of governance quality has been superseded by the negative impacts of the inequalities.This segment of the findings extends the results obtained by Acheampong et al. (2022) on energy poverty dimensions and Sinha et al. (2022aSinha et al. ( , 2022b) ) on energy innovation.This leaves a challenge for the policymakers to build a conducive climate for energy transition by reducing the social imbalances within the nation.Maintaining a steady governance is important for achieving energy transition and realizing the potential impact of governance on energy transition entails social stability.The attainment of the SDG objectives and to comply with the targets set during the COP26 Summit, the OECD member countries need to internalize the social imbalances through necessary policy interventions.The policy void observed in this regard might open a space for discussion for realigning the policy framework for achieving energy transition in the OECD countries.Subsequently, the marginal impact of Environmental Tax will be analyzed.Without any moderating impact (Model 1), the marginal impacts are found to be 1.1202 (the model with Transparent Laws with Predictable Enforcement) and 1.2983 (the model with Absence of Corruption).On relaxing the Ceteris Paribus condition and allowing the moderating impacts, the marginal impacts of Environmental Tax have turned out to be 0.8998 (the model with Transparent Laws with Predictable Enforcement) and 0.9247 (the model with Absence of Corruption).It is visible that the marginal impact of Environmental Tax is reduced under the influence of moderation.Like the case of Environmental Technology, this situation also complies with Condition 1, as deliberated in Eq. ( 8).This indicates the ineffectiveness of governance quality in presence of the inequalities.This segment of the findings extends the implications drawn by Xu et al. (2022) in the case of the G7 countries.Financialization of energy transition activities might not be effective in the presence of social inequalities.The Swedish evidence confirms this finding (Cheng et al., 2021).According to International Monetary Fund, the rising inequality within a nation might create a perceptive trade-off between energy security and transition, and climate finance through the Pigouvian Tax might prove to be ineffective (Adrian, 2022).A United Nations Development Programme (UNDP) funded project in Indonesia shows that the governance of the climate financing process for bringing energy transition has still a long way to bring inclusivity in the gendered sphere, as well (Atmadja et al., 2020).The disruption of the economic activities through this imbalance and perceptive trade-off are seemingly higher in terms of the capacity of governance structure to manage.This situation might pose a serious  threat in achieving sustainable energy future in these nations.The policymakers need to introduce a policy intervention to achieve energy transition by internalizing these negative externalities.Now, the marginal impacts of Globalization are 0.8967 (the model with Transparent Laws with Predictable Enforcement) and 0.9207 (the model with Absence of Corruption), without any moderation (Model 1).Allowing the moderating impacts changes these marginal impacts to 0.8488 (the model with Transparent Laws with Predictable Enforcement) and 0.7863 (the model with Absence of Corruption).These visible changes in the marginal impacts show that Globalization loses its effectiveness under the influence of moderation.This situation supports Condition 1, as deliberated in Eq. ( 8).This indicates that governance quality might be ineffective in bringing energy transition in presence of the inequalities.Rising inequality within a nation hampers the exogenously driven industrial growth and technological diffusion.This deterrence is caused by the consequential imbalances arising out of inequality.Widening economic and cognitive gaps create hurdles in achieving energy transition through globalization.Rising imbalances within the nation might make the nation a less attractive destination for investment in energy projects, and thereby reducing the effectiveness of globalization.Although the studies by Dutt and Mukhopadhyay (2005) and Lee et al. (2020) have largely analyzed the impact of globalization on inequality, the other side of the coin has been unexplored.This uncharted dimension might create a predicament for the policymakers in achieving energy transition through globalization.Therefore, policy intervention is necessary to internalize these imbalances for achieving energy transition.
Lastly, the marginal impacts of Education Expenditure are estimated to be 2.3021 (the model with Transparent Laws with Predictable Enforcement) and 2.5378 (the model with Absence of Corruption), without any moderation (Model 1).These marginal impacts change to 1.2586 (the model with Transparent Laws with Predictable Enforcement) and 1.1333 (the model with Absence of Corruption), upon relaxing the Ceteris Paribus condition and allowing moderation.The presence of moderation has been found to reduce the marginal impacts of Education Expenditure.This situation supports Condition 1, as deliberated in Eq. ( 8).This indicates that governance quality might be ineffective in bringing energy transition in presence of the inequalities.The incidence of poverty might rise with the rise in the economic and cognitive inequality within a nation.Misallocation of wealth might restrict the access to education for people from comparatively lowincome strata.Besides, cognitive bankruptcy arising out of gender inequality might result in lower educational attainment.Lack of access to education leaves the Education Expenditure ineffective, while restricting the full potential of research and development activities towards energy transition.The findings of this segment comply with and extend the findings of Apergis et al. (2022) and Liu and Zhang (2022).The presence of the negative social externalities arising out the prevailing economic and cognitive disparities might create a preemption on the energy transition.Policymakers need to focus on this void in the policy sphere for accomplishing the objectives of the SDGs.

Analysis of dynamic marginal impacts
The static marginal impacts of all the model parameters were computed following the Ceteris Paribus condition.However, this conditional assumption might not hold true in a dynamic economic scenario.Therefore, the marginal impacts are allowed to change over the sample period.Rather than taking the sample means of the moderators, their annual means are used to compute the dynamic marginal impacts.These dynamic marginal impacts are shown in Fig. 3.
The marginal impact of Environmental Technology is found to be gradually improving over the study period.However, the gap between the marginal impacts for "Transparent Laws with Predictable Enforcement" and "Absence of Corruption" gives certain insights.It is visible that the improvement in the marginal impact of Environmental Technology is more in presence of Absence of Corruption, whereas the improvement in the marginal impact is incremental for Transparent Laws with Predictable Enforcement.It indicates that even in presence of the inequalities, Environmental Technology can improve the energy transition in the OECD countries if the offices of public administration do not abuse their authoritarian position for personal gain.Bringing transparency in the legislative frameworks and effective enforcement of those legislations can sustain the energy transition but creating a climate of trust and empathy might help in developing and diffusing it.Therefore, a balance between these two aspects of governance needs to be maintained by the policymakers.
The marginal impact of Environmental Tax is found to be gradually improving over the study period.However, it is visible that the improvement in the marginal impact of Environmental Tax is more in presence of Absence of Corruption, compared to the improvement in the marginal impact for Transparent Laws with Predictable Enforcement.The low incidences of corruption in the public administration helps in sustaining the tax regime effective.It helps in reducing the cases of tax evasion, and thereby, financialization of the energy transition process can be smoothened.Mere legislative transparency and enforcement might not be able to bring out the potential benefits of the tax regime.It is worthwhile noting that the moderating impact of "Absence of Corruption" is more effective even in the presence of inequalities.Hence, the policymakers might need to make the public administration system free from rent-seeking mechanism, rather than enforcing the laws.
A similar scenario can be visualized in case of the marginal impact of Globalization.The improvement in the marginal impact of Globalization is more in presence of Absence of Corruption, compared to the improvement in the marginal impact for Transparent Laws with Predictable Enforcement.The low incidences of corruption in the public administration helps in making the energy projects attractive investment destinations.Although legal enforcement is necessary for the operationalization of this process, latent transparency in the administrative structure helps to materialize it.Therefore, to attract investment in energy projects and ensure energy transition, policymakers need to prioritize between these two facades of governance.
Lastly, the marginal impact of Education Expenditure is gradually improving over the study period.The improvement in this marginal Note: The elasticities are computed at the sample means.
A. Sinha et al. impact of Education Expenditure is more in presence of Absence of Corruption, compared to the improvement in the marginal impact for Transparent Laws with Predictable Enforcement.Potential benefits of education can be obtained in absence of corruption in the public administration, as incidences of corruption might hinder the effective allocation of resources.This hinderance might have a negative impact on the research and development scenario within the nation, and consequently, the energy transition might be hampered.Moreover, the impact of inequalities on the spread of education might be enhanced in the presence of corruption.Although the legal framework is necessary to create a legislative baseline for ensuring a smooth allocation of educational resources, having a supportive administrative setup is more necessary to operationalize it.Hence, the policymakers need to focus more on making the administrative setup corruption free for ensuring energy transition in these nations.

Analysis of extreme marginal impacts
Estimation of the marginal impacts can provide additional insights by considering the extreme conditions.For capturing these marginal impacts, the 5th and 95th percentiles of moderators are taken as low (L) and high (H) extremes.The marginal impacts of the model parameters for low and high income and gender inequalities are captured under low and high extremes of the two Governance Quality indicators.The marginal impacts of the model parameters under extreme conditions are computed by taking the combinations of these extremes, i.e., L-L, L-H, H-L, and H-H.These marginal impacts under extreme conditions are reported in Table 7.
The marginal impacts of all the model parameters are found to be high when (a) both the inequality indicators are low, and (b) the governance quality indicators are high.In all the cases, the moderating impact of Income Inequality is found to be higher than the Gender Inequality.This indicates the severity of the impact of social imbalance on energy transition, compared to the impact of cognitive imbalance.However, the combined impact of these two inequalities is enhanced in the presence of low or poor governance quality.It is also worthwhile noting that the marginal impacts of all the parameters are lower than the static marginal impacts (Model 2 of Table 6), when the governance quality is low, and both the inequalities are high.On a similar vein, the marginal impacts of all the parameters are higher than the static marginal impacts (Model 2 of Table 6), when the governance quality is high, and both the inequalities are low.These two extreme scenarios depict the most undesirable and the most desirable conditions for energy transition in any nation.
It is also crucial to note that while the marginal impacts of Environmental Technology, Environmental Tax, and Education Expenditure are positive under all circumstances, the marginal impact of Globalization becomes negative under high income inequality and low governance quality.Policymakers need to internalize the social imbalances arising within the country to sustain the international energy investments and technology transfers.
These extreme marginal impacts are graphically represented in Fig. 4-7.The impacts are derived by taking the entire spectrum of the inequality indicators.The governance quality is measured at low (05th percentile), medium (50th percentile), high (95th percentile).All the diagrams show that the marginal impacts of all the model parameters start improving with the rise in the governance quality.These results also show that the marginal impacts of all the model parameters show better improvement in presence of Transparent Laws with Predictable Enforcement.It clearly indicates that the legal enforcement might have a superior edge over the corruption control in ensuring energy transition under the extreme conditions.Although the dynamic marginal impact has shown the gradual improvement of the marginal impacts under the Absence of Corruption, it is advisable for the policymakers to resort to legal enforcement under extreme conditions.

Robustness check
Robustness of any policy framework largely depends on (a) the robustness in the parameter selection, and (b) the robustness of the estimation process.Henceforth, the robustness of the estimates is verified using an alternate methodological approach and an alternate model specification.
As the baseline empirical model is estimated using two-step system GMM, the alternate methodological approach should be able to take account of the possible endogeneity issues.Hence, the Two-Stage Least- Squares (2SLS) method developed by Cumby and Obstfeld (1981) is employed to estimate the empirical model.This method assumes significance for estimation when the residual term is associated with the model parameters.The estimation results are reported in Table 8.
Along with this, the baseline empirical model is estimated using an alternate specification.As the energy transition indicates how a country moves up the energy ladder and achieves energy efficiency, the alternate model specification needs to take care of this aspect.Hence, Energy Efficiency has been taken as the alternate specification.Following Leal and Marques (2019) and Sinha et al. (2020), Energy Efficiency is estimated.
Assuming the energy intensity of a sector to be EY it , and the sectoral transformation of the economy is SEC it , then the cumulative energy intensity EY t will take the following form: Here, E t and Y t denote the aggregate energy consumption and economic output at time t, correspondingly.E it and Y it indicate the energy consumption and economic output at time t for sector i.
Following the computation of EY t , energy intensity index EYI t is computed as a ratio of cumulative energy intensity at time t with respect to the base year (EY 0 = EY t | t=0 ).The functional form of EYI t is given by: The Fisher Ideal Index will be used to compute the Energy Efficiency, based on the obtained values of EYI t .However, this process entails computation of Laspeyres (LI t ) and Paasche (PI t ) indices.
Fisher Ideal Index (FI t ) is computed as the geometric weighted average of LI t and PI t .As it indicates the changes in Energy Intensity, its inverse will indicate the energy efficiency (EE t ).
Between any two timeframes (t 1 < t 2 ), EE| t=t1 > EE| t=t2 indicates more energy efficiency achieved by the economy.
This obtained value of Energy Efficiency is used as the alternate specification in the empirical model, and the estimation results are reported in Table 9.Now, the estimation results of both the robustness check procedures will be analyzed.The coefficients of Model 1 reported in Tables 7 and 8 indicate stability of the model parameters in terms of their observed impacts.However, it will be interesting to note the nature of the marginal impacts of the model parameters with the alternate model and methodological specifications.In doing so, the marginal impacts of the model parameters are reported in Table 10, based on the coefficients of Model 2 as reported in Tables 8 and 9. Note: The extreme values are calculated at the 5th (L) and 95th (H) percentiles of the data.
A. Sinha et al.The static marginal impacts reported in Table 10 show that the marginal impacts decline in the presence of moderation.This is evident for both the specifications.These static marginal impacts are comparable with the impacts reported in Table 6.For both the cases, the chosen governance quality indicators are found to be ineffective in the face of the inequalities in boosting the energy transition in the OECD countries.This consistency in the changes in the marginal impacts of the model parameters demonstrates the robustness of the baseline model

Conclusion and implications
The present study has investigated how social imbalance and governance quality can shape the policy directives for energy transition in the 37 OECD countries over 2000-2019.The empirical outcomes show that the presence of social imbalance dampens the impacts of the drivers of energy transition, whereas governance quality helps in augmenting those impacts.These results give certain directions for the policy implications.

Theoretical implications
There have been several attempts in the literature of energy economics to capture the energy transition.The majority of those attempts focused on the demand side of the scenario.Now, measuring the energy transition necessitates capturing the output side scenario, i.e., whether the demand side aspects hitherto discussed in the literature have been translated in the transitional output, or not.This transition in the energy generation pattern needs to reflect the Energy Ladder Hypothesis, wherein the energy sources could be ranked either in terms of their energy efficiency or their carbon contents.Following the discourse of this hypothesis, the energy transition can be achieved by moving towards the energy sources with either lower carbon content or higher energy efficiency.In this way, energy transition needs to capture not only the transition from fossil fuel to renewable energy solutions, but also from dirtier to cleaner fossil fuel solutions and less to more efficient renewable energy solutions.The Energy Transition Index introduced in the present study can capture both aspects simultaneously by modifying the Lilien (1982) index.This modification has been done by introducing the weighted average of the different energy sources under both fossil fuel and renewable categories, while assigning a lower weightage to the dirtier and less efficient energy sources and higher weightage to the cleaner and more efficient energy sources.Thus, this index can capture the transition within and between energy solutions by following the principles of the Energy Ladder Hypothesis.As this index is an output-side indicator, this index can capture how a country is progressing in  achieving the energy transition.This index can depict a more comprehensive scenario regarding the energy transition, in comparison with the existing energy transition indices.The application of this index might open several avenues in empirically estimating the energy transition of various countries, and how any country is progressing on the way to achieve a sustainable energy future.Given that the countries around the world are compelled to attain the SDG objectives and comply with the COP26 commitments, they need to bring revamps in their prevailing energy policies.This process might require understanding the status quo of the energy transition.Being an output-side indicator, this index will help in identifying the policy intervention points, and thereby, helping the policymakers in developing effective energy policies.Recognizing those intervention points might also help in identifying the deterministic factors behind that particular scenario, and hence, the policies might have a far-reaching impact.This might possibly create a way to achieve a broad range of the SDG objectives in a cohesive manner.Therein lies the theoretical contribution of the present study.

Policy implications
The presence of social imbalance reduced the positive impacts of the drivers of energy transition, while governance quality improves it.Therefore, the policy framework needs to be designed in a way, so that the social imbalance can be internalized first.This is necessary to develop a conducive environment for policy implementation.Henceforth, the policy framework will be designed following a phase-wise approach.
As the social imbalance has two facades, and income inequality is found to have more severe impact than gender inequality, then the policy framework should be focused at internalizing the income inequality first, followed by gender inequality.During the first phase of the policy framework, the policymakers need to reduce income inequality through creating job opportunities.These job opportunities can be created by investing in public infrastructures.Now, while creating these job opportunities, the policymakers might also introduce the laws and regulations to maintain a percentage of female employees in the organization.This will help in sustaining the female participation in the workforce, and henceforth, initiating the reduction in the gender inequality.However, these implementation procedures will have fiscal consequences.So, the policymakers might need to devise certain measures to recover the costs incurred in this phase.Therefore, the second phase of the policy framework needs to focus on financial recovery, while taking care of the energy transition.In this phase, the financial institutions might be used as agents of this transition.For discouraging the firms from using the fossil fuel solutions and enhance the acceptability of environmental technologies, the financial institutions might introduce carbon footprint-linked differential interest rate mechanism.This will discourage the firms from using dirtier technologies and fossil fuel solutions, and they will gradually shift towards clean energy solutions.This mechanism will also help the comparatively cleaner firms to avail themselves of loans and advances at a cheaper rate.Besides this, the policymakers might make the environmental technologies available at a pro-rata rate, and the loans and advances from the financial institutions might be utilized to avail themselves of these solutions.This will ease the affordability of the environmental technologies.Also, imposing the Pigouvian Taxation on the emissions might push the firms to embrace these environmental technologies.The interest income and the tax revenue collected from these two avenues might gradually add to the financial stability of the nations.This fiscal income can be channelized to subsidize these solutions for household use.To enhance the affordability of these solutions, policymakers might introduce interest rate holidays based on the income levels of the households.Following the interest rate holidays, repayment of the advances taken by the households will rebalance the fiscal income of the nation.Now, development and deployment of the environmental technologies and initiation of the energy transition process cannot be stabilized if the policy framework disregard reaching the grassroots level.Once the previous two phases of the policy framework are operational, the policymakers might need to enhance the education budget to (a) amend the educational curriculums for stressing more on the environmental benefits of clean energy solutions, and (b) encourage research and development activities in the higher education institutes (HEIs) for the pursuit of improved technological solutions.Incubation facilities in the HEIs might serve the purpose of reaching economies of scale in the development of these technologies, and as a result, the overall cost of these technologies might come down.This will help both the industrial sector and households.As the fourth phase, the policymakers need to stabilize the overall policy climate by discouraging the possible emergence of any deterrents to the energy transition process.In this phase, the policymakers might choose to start the import substitution policies, so that the globalization route might not be utilized for importing dirtier energy solutions.Besides neutralizing the external deterrents, the policymakers also need to tackle the domestic deterrents.Strengthening of the legal enforcement and reducing the rent-seeking mechanism might help the entire policy climate conducive for energy transition.This strengthening of the governance will not only reduce the unwarranted use of the natural resources as public goods, but also will help the newly incubated clean energy generation firms to diffuse their knowledge and services across the country.
Operationalization of these four phases of the policy framework might serve several benefits.Once the energy transition has set in, the use of environmental technologies will help in reducing carbon emissions and enhancing energy efficiency.Gradual achievement of the economies of scale will also make these solutions cost-effective.Therefore, this policy framework will help in making the energy solutions cleaner and more affordable (SDG 7) and make the environment greener (SDG 13).Attainment of these two SDGs will help these countries in making a steady progress towards fulfilling the COP26 commitments.This policy framework might also act as a benchmark for the other countries to reorient their energy policies, so that they can progress towards the attainment of the SDGs by 2030.As this policy framework is broadly defined, it can be modified in keeping with the policy voids of the countries, and thus, the generalizability of the policy framework can be assured.When these four phases are operational, this policy

Table 10
Marginal impacts of the model parameters in elasticity terms (from alternate method and specification).Note: The elasticities are computed at the sample means.

From estimation using 2SLS
A. Sinha et al.

Fig. 3 .
Fig. 3. Trends of the marginal impacts of the core model parameters.

Fig. 4 .
Fig. 4. Marginal impact of Environmental Technology under different conditions.

Fig. 5 .
Fig. 5. Marginal impact of Environmental Tax under different conditions.

Fig. 7 .
Fig. 7. Marginal impact of Education Expenditure under different conditions Compliance with EU Energy Policy, and Regulatory Indicator for Sustainable Energy), Economic (Financial Market Sector Soundness, and Ease of Doing Business), and Technological (Carbon Lock-in, and Infrastructure & Innovation) aspects.These aspects extended the transition readiness captured bySingh et al. ( (Neofytou et al., 2020)takeholder interests(Singh et al., 2019).As these factors are responsible for developing the policy roadmap for the transition readiness, they indicate the input side aspects of the energy transition.This index answers to the question "How a country should prepare itself for energy transition?" • Second, the Sustainable Energy Transition Readiness Index(Neofytou et al., 2020)extended the aspect of transition readiness by taking Social (Public Awareness & Acceptance, and Human Capital), Political-Regulatory (Political Will &

Table 1
panel cointegration test outcomes illustrate the presence of cointegration among the model Representation of Extreme Marginal Impact analysis.

Table 2
Model summary of Lasso and Ridge Regression estimations.
* Governance Quality-I: Transparent Laws with Predictable Enforcement.** Governance Quality-II: Absence of Corruption.

Table 3
Model summary of Least Angle Regression with Lasso algorithm.
Xu et al. (2022)ergy transition, and the results reflect this claim.The study byXu et al. (2022)has shown the role of government education expenditure in boosting renewable energy development in G7 countries.The empirical results thus extend this finding.

Table 4
Summary of initial diagnostics.
a Significant at 1% level.* Governance Quality-I: Transparent Laws with Predictable Enforcement.** Governance Quality-II: Absence of Corruption.

Table 5
Results of two-step System GMM estimation.

Table 5
(continued ) Note: (a) ***, **, * indicate significance at 1%, 5%, and 10 levels, respectively.(b) For models with Transparent Laws with Predictable Enforcement, number of instruments is 34, and for models with Absence of Corruption, number of instruments is 36.

Table 6
Marginal impacts of the model parameters in elasticity terms.

Table 7
Marginal impacts of model parameters under extreme conditions.

Table 8
Robustness check of estimates with 2SLS estimation.

Table 9
Robustness check of estimates with alternate specification.