Abstract
In this paper, we fill the gap in the literature by identifying a negative relationship between fuel ethanol consumption and CO2 emissions, building on a sample of 17 European countries covering seven years, from 2010 to 2016. Based on a Panel Smooth Transition Regression approach we show that countries with high levels of income inequality have difficulties in avoiding environmental degradation by promoting policies and regulations for more intense use of biofuels. Furthermore, we bring strong empirical evidence suggesting that biofuels could be an alternative in the future to reducing CO2 emissions. In our opinion, this non-linear analysis could provide the scientific basis for authorities, especially the European Commission to promote environmental policies to a specific country with different levels of carbon emissions rather than to the entire group.
Highlights
Energy is an essential driver of economic development, regardless of whether we are talking about industrialized or transition countries (Destek & Sinha, 2020)
Before estimating the regression outlined in Eq (4), we need to investigate whether a nonlinear relationship between CO2 emissions and fuel ethanol production exists
We provide strong empirical evidence revealing the existence of an inverted U-shaped correlation between economic development and carbon leakages, while failing to identify significant results showing that financial development and demography amplify CO2 emissions
Summary
Energy is an essential driver of economic development, regardless of whether we are talking about industrialized or transition countries (Destek & Sinha, 2020). Most energy production involves the consumption of traditional sources like oil, coal, and gas, which creates an enormous amount of CO2. Over the past few decades, global greenhouse gas emissions have almost doubled. According to Hübler (2017) the level of CO2 emissions increased spectacularly from a 1.0% yearly average during the 90s to a 2.4% yearly average during 2000–2014. These emissions are leading to noticeable climate-change effects and global warming. More and more governments have set mandatory emission
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