The dynamic impact of renewable energy and institutions on economic output and CO 2 emissions across regions

Abstract

We provide a comprehensive and robust analysis of the role of renewable energy consumption and institutions on economic growth and in combating CO2 emissions across the regions and income groups. For our empirical model, we use annual data from 85 developed and developing economies across the world over the period from 1991 to 2012. We employ various econometric techniques from panel estimations to obtain the robust results. Our findings confirm that there is significant heterogeneity across the sub-samples. Overall, results from the system-GMM and fully modified OLS indicate that the growth of renewable energy consumption has a significant positive and negative impact on economic output and CO2 emissions, respectively. Institutions have a positive influence on economic growth and a reducing effect on CO2 emissions. Our findings suggest that both renewable energy deployment and institutions are significant in promoting economic growth and reducing CO2 emissions. Finally, we suggest that institutional alignment is necessary to promote the use of renewable energy across economic activities to ensure sustainable economic development.