Policies for carbon-zero targets: Examining the spillover effects of renewable energy and patent applications on environmental quality in Europe

Abstract

This study examined the spillover effects of CO2 and the marginal effects of trade and renewable energy in 29 countries in Europe using the spatial panel econometric models namely; the spatial error model, spatial lag model, and spatial Durbin model. The study further applied the pooled OLS, random, and fixed effects from the non-spatial models for comparative analysis. The Wald and likelihood tests showed that the dynamic spatial Durbin approach was the best model for the study. Furthermore, the fixed-effects model was selected as the most appropriate model for explaining the elasticities of the exploratory variables by the Hausman test. The results suggest that growing growing renewable energy in a country results in a decrease of carbon emissions in that country and neighboring countries, respectively. Additionally, the findings support the claim that CO2 emissions from one particular area spread to the next nation and the far-off trading partner. According to the findings, to achieve sustainable growth, regulatory agencies must take steps to reduce CO2 emissions from both within the target country and from other neighboring countries, suggesting that cooperation is the best option for mitigating environmental issues efficiently. Considering all the evidence, it is reasonable for national economies to cooperate for environmental protection purposes with their neighbors and create a commmon regulatory framework for efficient mitigation of carbon emissions.