The dynamic impact of renewable energy consumption on CO2 emissions: A revisited Environmental Kuznets Curve approach

Abstract

This paper considers a revisited Environmental Kuznets Curve (EKC) hypothesis with potential impact of renewable energy consumption on environmental quality. To this end, paper aims at investigating the validity of the EKC hypothesis employing the dependent variable of CO2 emissions and regressors of GDP, quadratic GDP and renewable energy consumption. This paper, hence, analyzes this revisited EKC hypothesis to observe if (i) there exists an inverted-U shaped relationship between environmental quality (in terms of CO2 emissions), per capita income and per capita income squared and (ii) there exists a negative causality from renewables to CO2 emissions within EKC model.Paper employs a panel data set of 17 OECD countries over the period 1977–2010 and launches panel FMOLS and panel DOLS estimations. The findings support the EKC hypothesis for the panel and indicate that GDP per capita and GDP per capita squared have the impacts on CO2 emissions positively and negatively, respectively, and that renewable energy consumption yields negative impact on CO2 emissions. Another remark of this paper is that the validity of EKC does not depend on income level of individual countries of panel in which EKC hypothesis holds.Eventually, paper argues that if countries carry out (i) policies, i.e., for fair and easy access to the electricity from renewable sources and (ii) policies to increase renewables supply through i.e. improved renewable energy technologies, they will be able to contribute to combating global warming problem as they increase their GDP’s.