Renewable energy: Is it a global challenge or opportunity? Focusing on different income level countries through Panel Smooth Transition Regression Model

Abstract

In the 21st century, climate change is a severe threat to the survival of the planet and humanity; to counter this threat, the significant role of renewable energy cannot be denied for sustainable development worldwide. The motive of this study is to examine the threshold level and asymmetric relationship between renewable energy and economic development in different regimes of the different income levels of 122 countries from 1995-2018 by using the novel technique Panel Smooth Transition Regression Model (PSTR). The results of the PSTR model suggest that the relationship between Renewable Energy and the Economic Growth of these selected countries is nonlinear. Furthermore, in most countries, there is a significant and positive relationship between renewable energy and economic growth in the high regime, except the higher-income nations has a significant and positive relationship in both low and high regimes. Overall full sample shows a significant and positive relationship between renewable energy and economic growth. Recommendations based on this study for these countries include: 1) energy-efficient resources should be adopted to increase renewable energy consumption. 2) The conventional energy consumption share should be reduced to improve the environmental quality for a sustainable future.