Enhancing environmental quality in Portugal: can CO2 intensity of GDP and renewable energy consumption be the solution?

Abstract

Despite Portugal's effort to reduce carbon emissions, the country still emits about 1.6% of the European Union's CO2 emissions. Meanwhile, limited empirical studies have been undertaken in the context of Portugal. As a result, this study examines the asymmetric and long-term impact of CO2 intensity of GDP, energy consumption, renewable energy and economic growth on CO2 emissions in Portugal from 1990 to 2019. The nonlinear autoregressive distributed lag (NARDL) is employed to uncover the asymmetric connection. The findings show that there is nonlinear cointegration among the variables. The long-run estimation reveals a positive change in energy consumption positively affects CO2 emissions, while a negative shock in energy consumption has a neutral effect on CO2 emissions. Furthermore, positive shocks of economic growth and CO2 intensity of GDP enhance environmental deterioration by increasing CO2 emissions. Meanwhile, the negative shock of these regressors positively impacts CO2 emissions. In addition, positive shocks in renewable energy enhance environmental quality, while negative shocks in renewable energy increase environmental deterioration in Portugal. Policymakers should focus on reducing per-unit energy usage and CO2 efficiency gains, which would necessitate a significant reduction in CO2 intensity andenergy density of GDP.