Renewable energy and CO2 emissions in G7 countries: does the level of expenditure on green energy technologies matter?

Abstract

Promoting green energy is generally considered a crucial way to mitigate energy-related CO2 emissions. However, the level at which a country's expenditure on green energy technologies interacts with renewable energy consumption to save the planet has been ignored in the literature. Within the context of the Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model, this study investigates the interaction effect of renewable energy and expenditure on green energy technologies in mitigating CO2 emissions in G7 countries over the period 1990-2017. The empirical results based on the Method of Moments-Quantile Regression (MM-QR) with fixed effectssuggest that renewable energy and expenditure on green energy technologies have a negative and heterogeneous effect on CO2 emissions. The interaction term has a stronger negative and heterogeneous effect across quantiles distribution of CO2 emissions. This suggests that the extent to which renewable energy exerts downward pressure on CO2 emissions is dependent on countries' expenditures on green energy technologies. In addition, the effect of the interaction term is stronger in countries with lower levels of CO2 emissions. Given these findings, the study suggests the need to promote investment in green energy technologies as a catalytic converter to mitigate CO2 emissions.