CO2 emissions, renewable energy and economic growth in the US

Abstract

Given the great importance of achieving sustainable economic growth, however, it has been suggested that the replacement for fossil fuels by renewable energy sources can reduce environmental pollution. Renewable energy can decrease emissions caused by economic activities through increasing renewable energy consumption in energy-intensive-polluted sectors, and adopting environmental-friendly technologies in production. Therefore, this paper examines the linkages between energy-related CO2 emissions, economic growth, and renewable energy consumption for the 48 U.S. states over the period 1997–2017 by employing the panel fixed-effects, the panel-corrected standard errors, the two-step Generalized Method of Moments, and the Method of Moments Quantile Regression with fixed effects developed by Machado and Silva (2019). The results provide strong evidence of an inverted U-shaped relationship be-tween economic growth and environmental degradation, which known as the Environmental Kuznets Curve. Furthermore, this paper confirms that renewable energy consumption, electricity prices, and primary energy prices have negative impact on emissions whereas Heating Degree Days have a positive impact on emissions. Moreover, the panel quantile regression models confirm that the effects of all explanatory variables on CO2 emissions are heterogeneous at different quantiles. The findings of this paper provide evidence of the environmental benefits of promoting in renewable energy and suggest policy tools to reduce emissions through energy price mechanisms.