The effects of renewable energy, spatial spillover of CO2 emissions and economic freedom on CO2 emissions in the EU

Abstract

Renewable energy is a variable influencing CO2 emission. Previous studies investigated its effects on CO2 emission in the European Union (EU) countries using classical econometrics method. However, if there was a spatial dependence between CO2 emissions of the EU countries, the results of previous studies may have been biased. Another gap in the literature is nonlinear effects of economic freedom on CO2 emissions. To fill these gaps, the present study explored the aforementioned issues in the framework of environmental Kuznets curve in the EU countries for period 2000 to 2017 using a spatial dynamic panel data model. The results showed that the renewable energy consumption had a negative effect on CO2 emissions, and the relationship between economic freedom and CO2 emissions was U-shaped. Finally, a significant positive spatial lag coefficient was found for CO2 emissions, indicating that the CO2 emissions of a country were positively correlated with those of its neighbors.