Our research investigates the determinants of CO₂ emissions in Latin American countries (LAC), focusing on the roles of renewable energy consumption (RENC), economic growth (GDP), foreign direct investment (FDI), urbanization (URB), and access to electricity (ACEL). Employing a panel ARDL model, we account for both short-run and long-run dynamics between CO₂ emissions and their determinants. In the long run, RENC demonstrates a significant negative impact on CO₂ emissions (-0.15). Higher-order terms of RENC reveal non-linear effects, with RENC² showing a positive coefficient (0.05) and RENC³ a negative coefficient (-0.006), indicating diminishing returns as renewable energy consumption increases. Economic growth is positively associated with CO₂ emissions (0.1), reflecting the trade-off between economic expansion and environmental sustainability. FDI has a small but significant negative impact on emissions (-0.0003), while ACEL also reduces emissions (-0.03). In the short run, CO₂ emissions adjust to long-run equilibrium at a rate of -0.04, with GDP exerting the strongest short-run influence. The Energy Kuznets Hypothesis for CO₂ emissions is found to be a monotonically decreasing function of RENC, implying that as RENC increases, CO₂ emissions consistently decrease, albeit at a slower rate. The error correction term (ECT) is negative and significant (-0.04), indicating that CO₂ emissions adjust towards the long-run equilibrium by about 4% each period. The Dumitrescu-Hurlin panel causality test confirms bidirectional causality between RENC and CO₂ emissions. Unidirectional causality is also observed from URB to CO₂ emissions and from CO₂ to ACEL. Variations in energy consumption profiles and stages of economic development across the region explain differing impacts of RENC and FDI on emissions, where some countries experience the pollution haven effect, while others benefit from the pollution halo.
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