Role of institutional quality and renewable energy consumption in achieving carbon neutrality: Case study of G-7 economies

Abstract

This research emphasized the significance of institutional quality and renewable energy consumption in achieving the desired objective of zero carbon emissions. Following the COP21 (Paris Conference), many countries have fixed their national level objectives for achieving the carbon neutrality and to tackle the problem of global warming. Many researchers have focused their efforts on the aspects that contribute to environmental degradation. Meanwhile, there is a scarcity of appropriate research that highlights the environmental implications of institutional quality and renewable energy consumption. Therefore, the current study examines the influence of these significant determinants on CCO2 emissions in the G-7 countries from 1990 to 2018. The long run relationship between institutional quality, renewable energy consumption, GDP, exports, imports, and CCO2 emissions is approved, based on the assessed results of cointegration test. Besides that, the estimated results have endorsed a considerable decrease and increase in carbon emission both in the short and long run, i.e., institutional quality, renewable energy consumption, and exports reduce emissions, while imports and GDP raise emissions. The Dumitrescu and Hurlin causality test results show that policies aiming at improving institutional quality, renewable energy consumption, GDP, exports, and imports have a significant effect on CO2 emissions. As a result of these findings which recommends that G-7 countries' policymakers should emphasize institutional quality and renewable energy consumption in order to improve environmental quality by reducing carbon emissions and to achieve carbon neutrality.