Environmental quality and the role of economic policy uncertainty, economic complexity, renewable energy, and energy intensity: the case of G7 countries.

Abstract

This study explores the environmental impacts of economic policy uncertainty, economic complexity, renewable energy, and energy intensity on the countries in the Group of Seven (G7) countries. To this end, the study employs fully modified ordinary least squares and a fixed effects model with Driscoll and Kraay, Rev Econ Stat 80:549-560, (1998) robust standard errors and a panel dataset from 1997 to 2015. The findings demonstrate a long-term relationship between the variables of interest and carbon dioxide emissions and the ecological footprint. Specifically, high energy intensity increases environmental pollution while high economic policy uncertainty and renewable energy reduces environmental degradation. The environmental Kuznet curve of economic complexity and environmental quality holds for G7 countries. Moreover, economic policy uncertainty strongly moderates the environmental effect of renewable energy, economic complexity, and energy intensity. Specifically, although economic policy uncertainty amplifies the beneficial environmental effects of renewable energy and economic complexity, it enlarges the harmful effect of energy intensity on environmental quality. These empirical outcomes allow us to draw useful implications for policy makers to mitigate the environmental degradation.