Does Institutional Quality Strengthen the Energy-Mix-Climate Change Relation? A Case of Highly Vulnerable Countries

Abstract

The world's most vulnerable countries are at a high risk of the inverse impact of climate change, and at the same time, these countries have limited resources and strategies to cope with the effects of climate change. Developing countries are the consumers of climate change and more vulnerable to climate change. The current study will highlight the importance of institutions in reducing the impact of natural disasters. A sample of 40 highly vulnerable countries is used as a study sample based on the ND-GAINS ranking for 1995-2020. This sample is comprised of low-income and developing countries. Panel Quantile Regression is used as an econometric technique to find the results of this study. Results indicate that the high quality of institutions and the use of renewable energy resources in a mixture of energies have the potential to reduce the risk associated with climate change. Moreover, natural disasters and weak institutions in developing countries can potentially worsen the inverse impact of climate change and trap these countries in a vicious cycle. Policymakers and governments in these countries should focus on institutional reforms of institutions directly responsible for mitigating climate change. This is the only way these countries can break the vicious cycle and decrease their vulnerability to climate change.