The synergy effect through combination of the digital economy and transition to renewable energy on green economic growth: Empirical study of 18 Latin American and caribbean countries

Abstract

Tremendous effects on the global economy in terms of economic, social and environmental costs remind us of the catastrophic consequences of climate change and global warming caused by CO2 emissions. Therefore, accelerating decarbonization of the global energy system should be put in place to curb large amount of CO2 emission from hydrocarbon energy sources on which the current global value chain of production heavily relies.This study focuses on analyzing the effects of renewable energy transition, the digital economy, and the synergy between them on green economic growth in 18 Latin American countries. To capture the multidimensionality of these transitions, the Renewable Energy Transition Index (RETI) and the Digital Economy Index (DEI) are developed using the Principal Component Factor (PCF) technique. The FixedEffect Panel Threshold Regression (FEPTR) substantiates that renewable energy transition has a significant threshold effect on economic growth and environmental sustainability depending on the level of income and carbon emissions. On the other hand, the Method of Moments Quantile Regression (MMQR) shows that both renewable energy transition and the digital economy have a significant positive impact on economic growth in all quantile groups. For the environmental sustainability, only renewable energy transition is found to have a positive impact in all quantile groups. From the synergistic effect perspectives, the CO2 emissions reduction is observed in both the low and middle quantile groups, but the economic growth promotion is only observed in a low quantile group.