Renewable Energy Trade

Abstract

The Environmental Kuznets Curve (EKC) hypothesis has been vastly explored by academics over the last 30 years. This chapter tries to expand the EKC hypothesis's validation for selected developed countries, specifically for G-7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States), during 1992-2016. Additional explanatory variables are considered, such as renewable energy consumption, energy innovation and foreign direct investment (FDI). Through the Fully Modified Ordinary Least Square (FMOLS) econometric technique, a U-inverted linkage between economic growth and environmental degradation for the selected panel is observed, validating the traditional EKC hypothesis. Moreover, evidence of the positive impact of renewable energy innovation on the environmental correction process is offered. The results show significant evidence of the role of FDI and renewable energy innovation as driving forces of the environmental correction process. Finally, the empirical results offer a battery of policy recommendations for policymakers in designing broad environmental policy. This chapter covers previous literature gaps and confirms the positive role of energy efficiency measures for achieving sustainable economic growth in G-7 countries. Thus, some advances in the empirical literature are offered due to the fresh evidence of the positive effect of promoting renewable energy and the necessity of regulation for attracting clean business in selected G-7 countries.