The influence of green energy investments on environmental quality in OECD countries

Abstract

This empirical study analyzes the relationship between green energy investments on environmental quality in Organisation for Economic Co‐operation and Development (OECD) countries from 2000 to 2014. Environmental quality was disaggregated into five widely known proxies: carbon emissions, greenhouse gases, carbon monoxide, sulfur oxides, and nitrogen oxides. On one hand, using the system‐Generalized Method of Moments estimator, the results of this paper demonstrate that renewable energy investments, primary energy supply, and economic growth produces negative and significant relationships with the growth of carbon emissions, greenhouse gases, carbon monoxide, sulfur oxides, and nitrogen oxides. On the other hand, the interaction term between renewable energy and primary energy supply shows positive and significant associations with all environmental quality indicators. Furthermore, the present study finds a U‐shaped relationship between environmental quality and income for carbon emissions, greenhouse gases, carbon monoxide, sulfur oxides, and nitrogen oxides, which did not completely confirm existence of the environmental Kuznets curve. Therefore, the overall findings of the paper suggest that renewable energy adoption is of prime importance in lowering the growth in the emission of harmful gases and combatting climate change, although energy patterns and processes in OECD countries must be revised to ensure that they are environmentally friendly.

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