Environmental feasibility of a gradual shift from fossil fuels to renewable energy in India: Evidence from multiple structural breaks cointegration

Abstract

The prime purpose of this study is to empirically explore the comparative environmental impact of renewable and non renewable energy consumption in India. The study also investigates the impact of increasing levels of national income and development of financial sector on environmental quality and applicability of “Pollution Haven Hypothesis” in the country. Multiple structural breaks based [1] cointegration test has been applied to investigate the presence of cointegrating relationship among the variables. Modified Autoregressive Distributed Lag Bounds test has been applied to ascertain cointegration. The empirical results confirmed presence of cointegration with three structural breaks. The long run results revealed that renewable energy consumption has no direct mitigating impact on emission of greenhouse gases, however, a shift from conventional to renewable sources of energy may help the natural environment by lessening the hampering effect of fossil fuels on environment. Hence, India faces a dual challenge of achieving maximum possible growth of national output and simultaneously addressing the rising threat of global warming and climate change. The authors suggest policymakers to take necessary steps for attracting foreign investment in clean energy, providing fiscal and financial incentives for undertaking renewable energy projects and eliminating subsidies to fossil fuels.