Decoding renewable shift: a threshold analysis of environmental policy strategies and innovative technologies in OECD countries

The Organisation for Economic Co-operation and Development (OECD) countries remain heavily dependent on fossil fuels, which still account for over 80% of their primary energy supply. This persistent reliance raises critical questions about the effectiveness of policies aimed at accelerating the renewable energy transition. To address this, the current study investigates the nonlinear effects of environmental and innovation policies on the renewable energy transition across 37 OECD countries from 1995 to 2023, using a dynamic panel threshold regression model. The results show that environmental policy stringency significantly enhances the renewable energy transition, but its impact is nonlinear: after exceeding a critical threshold, the effect rises from 0.448 in the lower regime to 0.516 in the upper regime. Similarly, public fiscal R&D spending and the diffusion of environmental technologies exhibit statistically significant positive effects only above their respective thresholds. In contrast, the impact of low-carbon technology exports shifts from a significant negative influence in the lower regime to a positive, albeit statistically insignificant, effect in the upper regime. These findings underscore the necessity of targeted investment to push R&D spending and technology diffusion beyond their critical thresholds. Furthermore, the study highlights the importance of policy coordination to address structural inefficiencies and maximize synergies among various actors.