The Effects of Corruption, Renewable Energy, Trade and CO2 Emissions

Abstract

Corruption reflects a set of illegal activities that jeopardize the smooth functioning of economies, society, and climate and environmental issues. This article tests the relationships between economic growth, corruption, renewable energies, international trade, and carbon dioxide emissions using panel data for European countries, namely Portugal, Spain, Italy, Ireland, and Greece, from 1995–2015. As an econometric strategy, this research uses the panel fully modified least squares (FMOLS), panel dynamic least squares (DOLS), and panel two-stage least squares estimator (TSLS). Considering the variables utilized in the research and the panel unit root test, we observed that the variables are integrated I (1) in the first difference. The variables of corruption, economic growth, renewable energies, international trade, and carbon dioxide emissions are cointegrated in the long run, using the Pedroni and Kao residual cointegration test arguments. The methodology of Dumitrescu–Hurlin to test the causality between carbon dioxide emissions, corruption, economic growth, and renewable energy shows that there is unidirectional causality between carbon dioxide emissions and corruption and economic growth and corruption. The results suggest that the corruption index and economic growth have a statistically significant positive impact on carbon dioxide emissions. However, renewable energies and international trade reduce climate change and improve the environmental quality.

The Impact of Renewable Energy and Economic Complexity on Carbon Emissions in BRICS Countries under the EKC Scheme

“…According to our estimates, carbon dioxide emissions decrease (−0.708%), (−1.681%), and (−0.642%). The studies by Pata [23]; Aziz et al [24]; Elshimy and El Aasar [25]; Leitão [29] support our results demonstrating the importance of using clean energy to conserve the environment. The result obtained is still in line with the Kyoto Protocol and Paris Agreement (e.g., Dogan et al [6]; Leitão [29]; Leitão and Balsalobre-Lorente [39]).…”

“…The next step is to assess multicollinearity to see if we can specify econometric models. The studies by Koengkan et al [12] and Leitão [29] carried out this test before proceeding with the model's specification. The literature considers no multicollinearity problems when the variance inflation factor (VIF) is less than five.…”

“…As Leitão [29] refers, the Hausman test compares random effects (RE) versus fixed effects. According to our result, the fixed effects are more sustainable than random effects (e.g., Wooldridge [37]; Arellano [38]; Leitão and Balsalobre-Lorente [39]).…”

“…The panel cointegration estimators such as FMOLS (panel fully modified least-squares) and DOLS (panel dynamic least squares) were considered in this research (e.g., Stock and Watson [35], Phillips and Hansen [36]). Furthermore, according to Leitão [29] the models allow analyzing the long-term effects. Therefore, our study can observe the longterm effects of economic growth, renewable energies, the economic complexity index on pollution emissions.…”

“…The recent several empirical studies (e.g., Aziz et al [24]; Elshimy and El-Aasar [25]; Pata [23]; Aziz et al [24]; Elshimy and El-Aasar [25]; Leitão [29]) argue that renewable energy is directly associated with sustainable development and the upgrading of air quality.…”