Green energy, carbon emission and economic prosperity; an evidence of global perspective

Abstract

Purpose Globally, the paucity of conventional energy sources has created an unprecedented increase in demand for green energy. Continuous dependency on conventional energy sources has given rise to several undesirable environmental consequences. In the 20th century, the international forum pondered about the development and uses of green energy, which commenced with the realization of global warming and the signing of the Kyoto Protocol agreement. This study aims to divulge the nexus between green energy, carbon emissions and economic prosperity from a global perspective. The study has been conducted by considering panel data of 35 global economies from 1971 to 2019. Design/methodology/approach To calibrate the uses of green energy, this study dwells upon the ratio between green energy consumption and total energy use. These instrumental variables have been widely acknowledged and accepted by several empirical analysis done in the past (Lin and Moubarak, 2014; Shahbaz et al., 2015). This research specifically uses the emission of carbon dioxide in a million tons as an instrumental variable of environmental degradation, which has been disregarded by all-preceding researchers from a global perspective. Additionally, this study also considers real gross domestic product value in terms of US$ (2010 constant price) as an indicator of economic prosperity. The same has been contemplated by an ample number of empirical research studies conducted previously. Thus, the authors adopted the panel autoregressive distributed lag (ARDL) technique to achieve this research objectives; and to tackle the issue of contemporaneous correlation, the authors applied cross-sectional augmented autoregressive distributed lag (CSARDL) of common correlated effect pooled mean group (CCEPMG). Findings The results of panel ARDL analysis reveal that in the long-run, real gross domestic product (GDP) leads to carbon emission, whereas green energy uses do not have a substantial effect on the reduction of carbon emission. However, in the short-run, green energy consumption seems definitely helpful for combating carbon emission, while real GDP instigates carbon emission. This study effectively fortifies the notion of a trade-off between ecological pollution and economic prosperity. The empirical results of the Granger Causality test produce evidence of unidirectional causality from carbon emission to green energy uses and from real GDP to carbon emission in the panel countries Research limitations/implications First, decisive corollaries of the conclusions drawn above have been made purely on the basis of a comprehensive investigation of 35 global economies. However, there is the scope for inclusive examination by considering more modern economies simultaneously. Second, this paper studied the potential impact of the uses of green energy and real GDP on carbon emission. Notably, the inference of this study has been grounded on three relevant variables, whereas there are possibilities that such an investigation could possibly be extended by considering other instrumental variables of environmental pollution. Originality/value A significant number of studies in the past have investigated the connection between renewable energy consumption (REC) and economic growth. To the best of the authors’ knowledge, none have looked to investigate the nexus between REC, economic prosperity and environmental sustainability simultaneously, specifically from the global perspective. Hence, this study intends to widen the prevailing perception of the emerging context above in two ways; first, by reconnoitering the effect of REC on environmental consequences and economic progress simultaneously, which has not been accomplished in extant literature. Second, the authors also strive to gradually augment the comprehensive analysis by expanding the study from a global perspective and by constructing the panel data of developing and advanced economies.