The role of financialization and circular economy in achieving energy transition and sustainable development goals (SDGs) number 6: evidence from selected countries

Abstract

This study examines the impacts of financialization and circular economy on energy transition, clean water and sanitation in 45 selected countries during the period from 2013 to 2022. Energy transition calculated as renewable energy consumption and clean water and sanitation calculated as people using safely managed drinking water and sanitation services are dependent variables; financialization calculated as financial development index and circular economy calculated as municipal waste recycle are independent variables; income, trade openness, foreign direct investment, remittances, resources rents, urbanization are control variables. By using GMM estimator, our research found that financialization and circular economy would exert a positive impact on clean water, and energy transition, however, financialization has no effect on sanitation. Moreover, it is discovered that in general, among three financial development indicators, financial depth generally has the strongest impact on energy transition, clean water and sanitation. These findings are expected to contribute to the development of financialization and circular economy so that energy transition is promoted and people in these countries could have better access to clean water and sanitation. In addition, it is recommended that local authorities and financial institution ought to increase the influence of access and efficiency of finance.