Toward a sustainable environment: Nexus between CO2 emissions, resource rent, renewable and nonrenewable energy in 16-EU countries

Abstract

The study investigates the long-run and causal interaction between, renewable energy consumption, nonrenewable energy consumption, and economic growth in a carbon function. The current study incorporates natural resources rent to the model as an additional variable. Empirical evidence is based on a balanced panel data between annual periods of 1996–2014 for selected EU-16 countries. The Kao test reveals a cointegration between carbon dioxide emissions, economic growth, natural resources rent, renewable, and nonrenewable energy consumption. The Panel Pooled Mean Group-Autoregressive Auto regressive distributive lag model (PMG-ARDL) suggests a positive significant relationship between the countries' natural resource rent and CO2 emissions in the long-run. Implying that the overdependence on natural resource rent affects environmental sustainability of the panel countries if conservation and management options are ignored. Our study affirms that nonrenewable energy consumption and economic growth increase carbon emission flaring while renewable energy consumption declines CO2 emissions. The panel causality analysis reveals a feedback mechanism between economic growth, renewable, and nonrenewable energy consumption. We further observed a feedback causality between natural resources rent and economic growth. Effective policy implications could be drawn toward modern and environmentally friendly energy sources, especially in attaining the Sustainable Development Goals.