The role of renewable energy consumption and commercial services trade in carbon dioxide reduction: Evidence from 25 developing countries

Developing countries play a dominant role in global carbon emissions. This study, for the first time, uses a panel of 25 major developing countries during the years 1996-2012 to explore the role of renewable energy consumption and commercial services trade in generating carbon emissions. The share and size of renewables consumption are both analysed for comparison purpose. Granger causality tests show that long-run bidirectional Granger causalities exist between economic growth, renewable energy consumption, international commercial services trade, and carbon emissions. Panel co-integration tests identify that long-run equilibrium exist between analysis variables. We also apply fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) for panel estimates. The Empirical results indicate that economic growth has significant effects on carbon emissions; the Environmental Kuznets Curve hypothesis is verified; increasing the share of renewable energy consumption contributes to carbon reduction; increasing the size of renewable energy consumption contrarily raised emissions; expanding commercial services trade could reduce carbon emissions. Our findings suggest that developing countries should promote commercial services trade and the share of renewable energy consumption for low-carbon economic growth.