Muhammad Farhan Bashir, Fouad Jamaani, Jue Wang, Huan Huang
ABSTRACT Climate change and environmental degradation challenges in emerging economies require urgent shifts within energy policies. However, such transformational changes require massive concessional funding. Within these parameters of climate policy, energy aid allocation has gained support in solving climate change and global warming. However, the underlying environmental factors and their association with energy aid on climate change remain uncertain. The current study examines the role of energy aid over climate change in top‐10 energy recipient economies from 2002 to 2022 by using an extensive econometric strategy to report that energy aid, energy efficiency, human development, and institutional quality are key to environmental sustainability. We further research energy aid sub‐components to reveal that renewable energy aid, energy policy aid, energy distribution aid, and non‐renewable energy aid help optimize energy aid structure to improve how structural and technical effects interact with sustainable development transition. Our integrated investigation enables us to propose novel policy frameworks that ensure fair energy aid distribution, promote knowledge‐sharing‐based energy policies, support capacity building, and facilitate energy policy adjustments to achieve net‐zero transition.