Renewable energy and CO2 emissions: New evidence with the panel threshold model

Abstract

The increased concerns over climate change led to a large body of literature that examined the impact of energy and economic growth on carbon dioxide (CO2) emissions per capita. The majority of the existing studies employed various linear panel estimation techniques ignoring the potential nonlinear effects of energy and income on CO2 emissions per capita. To fill this gap, this study uses panel data consisting of 97 countries between 1995 and 2015 and examines the nonlinear impact of renewable, non-renewable energy consumption, economic growth on CO2 emissions per capita by using a dynamic panel threshold model that is robust to cross-section dependence. Our findings indicate the effect of growth in renewable energy consumption per capita on the growth of CO2 emissions per capita is negative and significant if countries surpass a certain threshold of renewable energy consumption. This finding mainly holds for developed countries and countries with stronger institutions and is robust to the use of an alternative proxy for renewable energy consumption. Our findings highlight the fact that increased renewable energy consumption would only reduce CO2 emissions per capita if and only if countries surpass a certain threshold of renewable energy consumption.