The asymmetric effect of renewable energy and trade on consumption-based CO2 emissions: The case of Italy.

Abstract

Although numerous studies in the literature have been conducted to model CO2 emissions, there is a lack of empirical knowledge of consumption-based CO2 emissions, which are adjusted for international trade, specifically. Therefore, the present study aims to close this gap in the literature in the case of Italy, while capturing the asymmetric effect of trade, renewable energy, and economic growth on consumption-based CO2 emissions. The present study uses the Gregory-Hansen test for cointegration with regime shifts, Markov switching regression, nonlinear autoregressive distributed lag (NARDL), and frequency domain causality test. The study's outcomes reveal that (1) the asymmetric effect of import on consumption-based CO2 emissions is positive, implying that rising import is associated with declining consumption-based environmental quality; (2) export, renewable consumption, and economic growth reduce consumption-based CO2 emissions in Italy. Moreover, these outcomes are supported by the outcomes of the frequency domain causality test. These innovative insights may prompt policy-makers to implement eco-friendly methods, such as renewable energy distribution and environmental innovation, to achieve a greener future. Integr Environ Assess Manag 2022;18:784-795. © 2021 SETAC.