A safe path towards carbon neutrality by 2050: Assessing the impact of oil and gas efficiency using advanced quantile-based approaches

Abstract

In the present era, we are confronted with a dilemma: how can economic prosperity be attained while addressing the ecological challenges associated with energy resource usage. Sectors such as aviation, refining industries, and transportation face increasing pressure to reduce their reliance on fossil fuels. To achieve this, the promotion of energy efficiency and renewable energy solutions, which have often been overlooked in environmental studies, have become crucial. In this context, the current study aims to assess the environmental impacts of gas efficiency and oil efficiency in Japan. The data used for this evaluation spans from 1990/Q1 to 2020/Q4. Moreover, the roles of environmental innovation and renewable energy are considered in the study. To investigate these interrelationships, the study relies on various quantile-based approaches, including quantile-on-quantile regression, cross-correlation analysis, recursive cross-quantilogram correlation, quantile cointegration, and quantile causality. The findings obtained from the quantile regression and quantile-on-quantile regression approaches indicate that both gas and oil efficiency promote the reduction of CO2. Similarly, across all quantiles, environmental technological innovation and renewable energy positively promote ecological quality by mitigating CO2. Furthermore, the quantile causality analysis reveals a significant causality in both mean and variance from gas efficiency, oil efficiency and environmental technological innovation to CO2, although the strength of the causality is relatively weak in the mean. Additionally, the results from the time-varying recursive cross-quantilogram correlation provide evidence of significant correlations between CO2 and its determinants in the 0.1, 0.5, and 0.90 quantiles throughout the study period. These findings serve as the basis for the formulation of effective policies to mitigate CO2 emissions.