Renewable energy consumption, urbanization, financial development, income and CO2 emissions in Turkey: Testing EKC hypothesis with structural breaks

Abstract

Abstract In this study, the short- and long-run dynamic relationship between per capita GDP, per capita carbon dioxide (CO2) emissions, financial development, per capita total renewable energy consumption, hydropower consumption, alternative energy consumption and urbanization was investigated by using ARDL bounds testing approach, Gregory-Hansen and Hatemi-J cointegration tests for Turkey during 1974–2014. The results of three cointegration test indicated that there was a long-run relationship between these variables. The coefficients obtained from the ARDL, fully modified least squares (FMOLS) and canonical cointegrating regression (CCR) estimators showed that economic growth, financial development, and urbanization increase environmental degradation, while total renewable energy consumption, hydropower consumption, and alternative energy consumption had no effect on CO2 emissions. The findings showed that economic growth caused the greatest increases in CO2 emissions, followed by urbanization and financial development. However, renewable energy consumption was not at a desirable level to reduce CO2 emissions. The study also support environmental Kuznets curve (EKC) hypothesis, which establishes an inverted U-shaped relationship between economic growth and CO2 emissions. The turning points of per capita GDP obtained from long-run regressions were found to be around 13523–14077 US Dollars, outside the sample period. The overall results indicated that Turkey has not reached the level of per capita GDP that can reduce environmental pollution and renewable energy consumption is not a solution to reduce CO2 emissions.