What level of renewable energy production will reduce ecological footprint without compromising trade? Evidence from Shanghai Cooperation Organization nations.

Abstract

In order to decarbonize the global economy and reduce environmental degradation, it has become necessary to switch from using fossil fuels to renewable energy. However, a net zero global economy cannot be achieved without understanding the total renewable energy generation threshold and associated investment amount. This study estimates the renewable energy generation threshold to mitigate environmental degradation using data from 2003 to 2019 while focusing on Shanghai Cooperation Organization (SCO) nations. A panel fully modified model and the eight permanent nations of the SCO are employed. Our results show that while trade openness, foreign direct investment, and economic activities positively drive environmental degradation, renewable energy generation is a negative driver, and population has no relationship with environmental degradation. The threshold analysis shows that SCO nations need to increase their renewable energy generation from the current average of 2.403 to 7.737. Policy recommendation regarding how these nations can raise this money has been provided.