How does renewable energy contribute to the growth versus environment debate?

The relation between carbon emissions and economic growth is one of the most debated topics in the literature. Curbing global emissions while fostering economic growth is at the heart of the Sustainable Development Goals (SDGs), the 26th United Nations Climate Change Conference (COP26), and the resulting Glasgow Climate Pact. Using data from 22 emerging economies covering 1990-2018, we examine the role of renewable energy in balancing CO2 emissions reductions and economic growth. Since economic growth and emissions are mutually determined, we use a simultaneous-equation modeling approach based on the GMM method to deal with un-observed heterogeneity. The empirical results show that (i) economic growth increases per capita emissions while per capita emissions decrease economic growth, confirming the conflict between economic growth and carbon emissions reduction; (ii) renewable energy reduces emissions and increases economic growth; (iii) renewable energy moderates the positive impact of economic growth on emissions; and (iv) renewable energy moderates the negative effect of emissions on economic growth. Overall, renewable energy could be a solution to reach the dual objectives of continuing economic growth and reducing CO2 emissions in emerging economies. These results call for policymakers to take urgent measures and appropriate policies toward a low-carbon energy environment to achieve these dual objectives.

Automated summary

The study shows that renewable energy can balance the relationship between emissions reduction and economic growth in emerging economies, with the potential to promote economic growth while reducing carbon emissions.