The dynamic impact of financial intermediary services, institutional quality, and environmental taxation on energy poverty in South Asia: The mediating role of renewable energy penetration

Abstract

Energy poverty remains a critical challenge in South Asia, with millions lacking access to reliable and affordable electricity. This study uses an ARDL-ECM framework to examine the impacts of financial services, institutional quality, and environmental taxation on energy poverty in South Asia over the period 1995 to 2023. We find that (1) financial development significantly reduces energy poverty in the long run, but only if institutional quality exceeds the 32.6th percentile; (2) renewable energy penetration plays a dual-phase mediating role with respect to energy poverty, exacerbating it in the short term but substantially reducing it in the long term; and (3) environmental taxation has an insignificant direct effect on energy poverty but indirectly helps to reduce it by incentivizing transitions to renewables. These results suggest that achieving universal energy access requires synchronized financial inclusion, governance reforms, and phased renewable deployment strategies.