Elsevier

Energy

Volume 248, 1 June 2022, 123619
Energy

A study of trilemma energy balance, clean energy transitions, and economic expansion in the midst of environmental sustainability: New insights from three trilemma leadership

https://doi.org/10.1016/j.energy.2022.123619Get rights and content

Highlights

  • Energy trilemma and transition nexus checked for environment and economic growth.

  • Trilemma energy balance encourages economic growth and environmental sustainability.

  • Clean energy transitions improve economic growth and environmental sustainability.

  • Individually clean energy improves the environment and declining economic growth.

  • Natural resources depletion deteriorates environmental sustainability.

Abstract

We investigate the impact of trilemma energy balance and clean energy transitions on economic expansion and environmental sustainability while moderating the role of clean energy and natural resources rents of the three trilemma leaders from 1990 to 2016. Through this study, we have developed a comprehensive empirical analysis, applied advanced econometric methodologies. Westerlund's panel co-integration suggests long-run relationships within the variables. Our long-run random effect generalized least squares (GLS), generalized least square mixed effect models (GLMM), and robust correlated panel corrected standard errors (PCSEs) findings indicate trilemma energy balance, clean energy transition, and natural resource depletion enhance economic growth while clean energy discourages this growth. Moreover, trilemma energy balance, clean energy transitions, and clean energy improve while natural resources depletion deteriorates environmental sustainability in the trilemma energy leadership. Increasing the trilemma energy balance by 1% boosts economic growth by 0.3874223%. By increasing the trilemma energy balance by 1%, the ecological footprint is reduced by −0.5901441%. A 1% acceleration in the clean energy transitions boosts economic growth by 0.1208461%. By accelerating the transition to clean energy by 1%, the environmental footprint would decrease by 0.0273685%. Crucial policy implications and study limitations are discussed.

Introduction

Healthy energy systems are secure, equitable, and environmentally sustainable, displaying a carefully managed trilemma energy balance among the three dimensions. Continuing this balance in the framework of rapid energy transitions to decentralized, decarbonized, and digital systems is thought-provoking, with the risk of passive trade-offs between equally precarious urgencies [1]. Energy sustainability is not just an opportunity to transform societies and grow economies. It is also a prerequisite to meet growing energy demand in many parts of the world and reduce the global carbon footprint. Individual countries must balance the three core dimensions of the energy trilemma: affordability and access, energy security, and environmental sustainability to build a solid basis for prosperity and competitiveness [2].

Energy security measures a nation's capacity to meet current and future energy demand reliably, withstand and bounce back swiftly from system shocks with minimal supply disruption. The dimension covers the effectiveness of managing domestic and external energy sources and the reliability and resilience of energy infrastructure. Energy equity assesses a country's ability to provide universal access to reliable, affordable, and abundant energy for domestic and commercial use. The dimension captures immediate access to electricity and clean cooking fuels and technologies, access to prosperity-enabling energy consumption levels, electricity, gas, and fuel affordability. Environmental sustainability of energy systems represents the transition of a country's energy system towards mitigating and avoiding potential environmental harm and climate change impacts. The dimension focuses on productivity and efficiency of generation, transmission and distribution, decarbonization, and air quality [3]. The success and sustainability of production systems rely on an eco-friendly energy system [4,5].

The world energy sector empowered energy consumers, emerging with new choices in consuming and managing their energy use [6,7]. Decentralization, marked by the increased use of distributed generation and distributed energy resources, significantly impacts demand and supply dynamics to meet the trilemma challenge. The “Energy Trilemma,” the challenge of balancing energy security, energy affordability, and environmental sustainability — provides a framework to understand the opportunities and disruptions of increased decentralization in the energy system [8]. Thus, the energy trilemma is about addressing three often conflicting challenges: ensuring energy security, providing energy equity access to affordable, clean energy, and achieving environmental sustainability [9]. The rate of improvement in overall trilemma performance generally increases as the energy transition progress improves in all three dimensions are accelerating and advancing. Energy transition brings unprecedented change to the energy sector globally as countries seek to decarbonize while energy policies and regulations themselves tend to lag with incremental changes. Energy Trilemma Index needs to evolve continually to remain relevant by including the indicators that best reflect the evolving energy sector [10].

This research's first crucial question is how much trilemma energy balance influences three trilemma leaders' economic growth and environmental sustainability. Le and Nguyen (2019) analyzed that energy security empowers sustainable economic expansion while energy security retrieves energy intensity and carbon adversely connected with economic growth. Energy access improves economic growth, broadens the rich and poor gap, and contributes to environmental unsustainability [12]. Interestingly, Demaria (2018) clarifies that a sustainable environment is not viable with economic growth [[14], [15], [16]]. The growing economic growth prompts an ascent in material and energy use and encouraging environmental deterioration. Though, Luciani (2020) clarifies that the energy transition's rapidity demonstrates whether the economic development will be supported or undermined. Rapid energy transitions include enormous transferals between investment and consumption. It is crucial to handle energy inequality, energy poverty, maintained economic growth, and environmental concerns, the most significant challenges and sources that create a global energy trilemma [18]. The nations that tend to be excellent at balancing the subsequent trade-offs have expanded their energy resources and effectively manage demand for energy through well-established energy efficiency programs [19,20].

The second essential question this research address is how much clean energy transitions affect the three trilemma leaders’ economic growth and environmental sustainability. Two opposing accounts regarding the economic effect of the clean energy transitions are often heard. First, the progress is a farfetched task to rejuvenate economic growth and increment business. The second, interestingly, gauges that destinations like receiving a carbon-neutral economy would be excessively costly. Moreover, the speed of clean energy transition presents a significant role in determining the growth potential of either supported or undermined. Rapid energy transition involves a massive transferal from consumption to investment and fast undesirability of existing capital stock, resulting in less likely to be helpful for rapid economic growth [17]. Given the speed of the energy transition, this transformation entails crucial changes at the local level of economies and societies. It is necessary to ensure a transition to a climate-neutral economy that can deliver on broader well-being and sustainable development goals [21]. Sustainable clean energy transitions prepare many future energy leaders capable of meeting the needs of energy transitions ensuring sustainable economic growth for humanity.

Another critical question this study discourse is how much alternative clean energy sources influence the three trilemma leaders’ economic growth and environmental sustainability. Maji [22] explored that clean energy is adversely related to economic growth, that clean energy discourages economic development. Peterson [23] indicated that higher population growth stimulates economic growth if coupled entirely independently. More energy consumption is aligned with more growth and development; others are linked with carbon emissions [24]. Promising sustained growth and challenging climate changes are at the heart while fulfilling the increasing energy demand. The renewable energy supply producing from renewables may limit the energy-mix market inconsistency balance [25]. Nowadays, renewable energy resource became more central it has less negative environmental impacts compared with fossil fuels [26]. That is why renewable energy sources consider dynamic transformations towards a neutral or zero-carbon world economy [27].

A thorough empirically studying the case of the three trilemma leaders (Switzerland, Sweden, Denmark) is vital as they have illustrated the advantages of longline energy and sustained environment strategies. In the twilight of energy security, they incorporated hydro-carbon energy sources, focusing diversifications, enriched scores of energy security, resilient and decarburized energy systems. They are the highest activists on energy equity, focusing on energy strategies to raise clean and affordable energy access. Access to reliable and affordable energy provided a roadmap to accomplish United Nations sustainable development goal seven. In the energy sustainability dimension, they are proved resilient policies action to decrease harmful emissions. These countries, coupled with the energy efficiency actions, brought a significant performance in environmental sustainability. These countries have provided a good platform and set the standards for the world to develop modified trilemma models. These countries managed the competitive energy demand of the energy trilemma and have proved a prospective of nationwide energy system recitals across each of the three trilemma dimensions [1]. The literature has ignored the interconnection among trilemma energy balance, clean energy transition with sustainable economic growth, and environmental sustainability. The purpose of this study is to examine the impact of the trilemma energy balance, clean energy transition on the sustainable economic growth and environment of the three trilemma leaders, using clean energy and natural resources as moderator variables, from 1990 to 2016.

The vital contribution of this research to the advanced literature is evidence-based, at least following grounds. First, this study combined the three alleged elements of trilemma energy balance (energy security, energy affordability, environmental sustainability), generated a principal component index, and measure that index as an explanatory variable to capture the trilemma energy balance effects on crucial trade-offs between economic growth and environmental sustainability. Second, this study combined the essential energy transition indicators, generated a principal components index, and measured that index as an independent variable to capture the effects of the clean energy transition on crucial trade-offs between economic growth and environmental sustainability. Existing literature like [11,28,29] uses these dimensions of trilemma energy balance individually to investigate influence. Also, the studies like those of [30,31] analyzed the influence of energy trilemma and energy transitions on economic growth. In contrast, those studies didn't adhere to the environmental sustainability perspectives, the most global concern of the modern world. Third, this study includes clean energy and natural resources into the pre-determined growth and pollution equations, which have prospective consequences for environmental sustainability and sustainable economic growth. Fourth, we choose a panel of unique three trilemma leaders that proves their potentials to overcome the trilemma energy balance challenges: energy security, energy affordability, and environmental sustainability. Fifth, we apply the most robust advanced econometric tests for empirical estimations, used random effect generalized least squares (GLS), generalized leas square mixed effects models (GLMM), and robust correlated panel corrected standard errors (PCSEs) linear regressions for long-run estimates.

The remainder of this paper is outlined as follows. Section 2 presents a literature review to help position the paper. Section 3 provides material, theoretical framework and econometric strategy. Section 4 presents the result and discussion derived from the empirical analysis. Section 5 provides the conclusion and policy implications.

Section snippets

Literature review

A minimal amount of literature on energy and the environment engages with the trilemma of energy balance and clean energy transitions. We deliberated the appropriate literature and divided it into two intersectional dimensional nexuses: First, the intersection among trilemma energy balance, economic expansion, and environmental sustainability, and the intersection among clean energy transitions, economic expansion, and environmental sustainability:

Material and theoretical framework

This study examines the impact of trilemma energy balance and cleaner energy transitions on economic expansion and environmental sustainability while moderating the role of clean energy and natural resources rents of the three trilemma leaders Switzerland, Sweden, and Denmark, from 1990 to 2016. Economic growth, per capita GDP recorded as constant 2010 U S. dollars, a sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in

Results and discussions

The results of descriptive statistics and correlations coefficient matrix are presented in Table 1. Most mean, minimum, and maximum values are almost similar, confirming the uniform panel data. The outcome of standard deviation reveals the highest level of instability is present in clean energy transitions and the lowest degree of instability in trilemma energy balance and ecological footprint. The correlation coefficient indicates the negative correlation between ecological footprint and

Conclusion and policy implications

This study examines the impact of trilemma energy balance and cleaner energy transitions on economic expansion and environmental sustainability while moderating the role of clean energy and natural resources rents of the three trilemma leaders Switzerland, Sweden, and Denmark, from 1990 to 2016. Using the principal component index, we generated two indexes, one for trilemma energy balance and the other for clean energy transitions. For the index of trilemma energy balance, we merged energy

Credit author statement

Irfan Khan: Writing-initial draft preparation, conceptualization, methodology, modeling, software, etc. Abdulrasheed Zakari: Supervision and Reviewing, Professor Jinjun Zhang Supervision and Reviewing. Dr. Vishal Dagar: Conceptualization, Methodology, Modeling, Revision, Professor Sanjeet Singh: Supervision, Revision, Conceptualization, Methodology, Modeling.

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

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