Determinants of Climate Readiness in OECD and MENA Nations: The Case of Country Governance, Financial Development and Institutional Quality

ABSTRACT

This paper explores the role of country governance, financial development and institutional quality in shaping climate readiness across 15 MENA and 26 OECD countries from 2002 to 2022. Empirical findings from panel fixed‐effects and panel generalised least squares estimators indicate that country governance plays a critical role in supporting climate readiness in both regions. While institutional quality enhances climate readiness in OECD countries, it may exert a detrimental effect in MENA countries in the absence of robust environmental governance. The direct impact of financial development is statistically insignificant in the overall sample; however, in high‐income countries, it may hinder climate readiness when short‐term economic benefits dominate, whereas in MENA countries, it facilitates climate readiness only when institutional quality is adequate. These results highlight the need for policymakers to integrate climate objectives into institutional frameworks, strengthen national governance and mobilise financial resources for green technology investments to narrow the climate readiness gap.