How far renewable energy and globalization are useful to mitigate the environment in Mexico? Application of QARDL and spectral causality analysis

Abstract

Renewable energy is considered to be a useful tool to mitigate global carbon dioxide emissions and its benefits are linked to globalization. To investigate the heterogeneous effects of renewable energy and globalization at different levels of carbon dioxide (CO2), the present study utilized the Quantile Autoregressive Lagged (QARDL) model. In addition, data for Mexico from 1990Q1-2018Q4 is used with the framework of the Environmental Kuznets Curve (EKC). The findings show that renewable energy mitigates CO2 emissions regardless of the quantile level. However, globalization is found to raise the ratio of CO2 emissions while interacting with only the higher quantiles of CO2 emissions. Additionally, the Spectral Causal analysis reveals that the GDP and GDP squared granger cause the CO2 emissions only in the long run. Also, renewable energy and globalization significantly granger cause CO2 emissions in the short, medium, and long-run, suggesting that any policy shock in any independent series will lead to cause carbon emissions. Besides, the findings confirm the existence of the EKC hypothesis for Mexico. Some useful policy implications are suggested based on the short and long-run parameters.