Population aging, renewable energy budgets and environmental sustainability: Does health expenditures matter?

Abstract

From the last few centuries, the human population has grown exponentially around the globe, and an increase in affluence has increased resource usage and pollutant emissions. In this respect, investment in renewable energy technologies plays an essential role in fighting against climate change and helps to achieve carbon neutrality targets. However, the pace of population aging is also increasing dramatically, which may require more health expenditures that may affect the renewable energy budgets. In this context, this study investigates the linkage between population aging, health expenditures, renewable energy budgets and carbon dioxide (CO2) emissions in G7 (Group of Seven) countries from 1985 to 2019. The second-generation estimation techniques robust to cross-sectional dependence and slope heterogeneity are used. The findings of Cross-Sectional Autoregressive Distributed Lag (CS-ARDL) depict that population aging and renewable energy budgets enhance the environmental quality of G7 countries by decreasing CO2 emissions. In contrast, health expenditures and economic growth attenuate environmental sustainability. The finding of CS-ARDL is also confirmed by the Augmented Mean Group (AMG) method. The Dumitrescu and Hurlin causality test outcomes indicate the unidirectional causality from population aging and renewable energy to CO2 emissions. There is a feedback effect between health spending, economic growth, and CO2 emissions. Another interesting discovery is that population aging leads to health expenditures and consequently affects renewable energy budgets. We also find that population aging can affect renewable energy budgets directly. In addition, this paper also reveals a bidirectional causal relationship between health expenditures and renewable energy budgets. Finally, drawing on these consequences, this paper proffers some policy recommendations to help G7 countries to achieve climate-related goals.