The Impact of Socio-economic and Environmental Sustainability on CO2 Emissions: A Novel Framework for Thirty IEA Countries

Abstract

The extent to which socio-economic factors other than income and household size are associated with household CO2 emissions and whether associations vary across emission domains remains contested in the literature. We explore the impact of socio-economic and environmental sustainability indicators on CO2 emissions in the presence of combustible renewables, and the economic growth of thirty International Energy Agency (IEA) member countries. We develop a comprehensive empirical analysis using panel data and apply advanced econometric techniques for the period from 1995 to 2018. The panel co-integration analysis indicates long-run relationships among the variables. In addition, augmented mean group analysis and common correlated effects mean group analyses explain that environmental sustainability reduces CO2 emissions in the short run. Findings of fully modified least square estimates and long-run dynamic least squares estimates confirm that socio-economic sustainability increases CO2 emissions and environmental sustainability decreases them. The results of Dumitrescu and Hurlin Granger causality analysis reveal that combustible renewables, environmental sustainability, and economic growth bidirectionally Granger cause CO2 emissions, but socio-economic sustainability unidirectional Granger causes environmental quality. Policymakers in the IEA economies are encouraged to establish policies that promote a sustained lifestyle, ecological awareness, clean technological innovations, limit CO2 emissions, ecological trade-offs, and CO2 emissions ceilings to avoid rebound effects and limit environmental degradation. The study’s limitations are discussed, and useful directions for future research in the area are proposed.