Powering environmental sustainability through renewable energy and natural resources: a Dynamic ARDL simulation approach.

Abstract

The objective of this study is to examine the role of renewable energy consumption and natural resource rents along with control variables of globalization and economic growth on the environmental sustainability of Jordanian economy from 1985 to 2019. These variables have been selected based on theory and empirical literature. We apply a Dynamic Autoregressive Distributed Lag (D-ARDL) technique along with robustness checks of Fully modified OLS (FMOLS), Dynamic OLS (DOLS), and Canonical Cointegrating Regression (CCR) techniques in order to achieve the above goal. The result from the analysis confirms that the environmental Kuznets curve (EKC) is not valid for the Jordan in either long or short term. Our estimation results also confirm the highly significant and negative impact of renewable energy on CO2 emissions in both the long and short term. However, both natural resource rents and globalization are significant and positive in the long run, implying that these variables are detrimental to the environmental quality. The interaction analysis presents detrimental effect of globalization in terms of renewable energy while it shows beneficial effect of globalization in terms of natural resource for environmental quality. The frequency domain causality result shows causality at different frequencies across the variables. Based on the results, several policy directions are provided in order to achieve environmental sustainability in Jordan.