The dynamic interrelationships of CO2 emissions and renewable energy consumption on economic growth in G20 countries : a panel VAR approach

Abstract

The interrelationship between CO2 emissions, renewable energy consumption, and economic growth is comprehensive, especially for the G20 countries, which contribute to huge global C02 emissions and the world economy. On the other hand, we require a deeper comprehension to formulate policies that harmonize economic expansion with sustainable development. This study will analyze the dynamic interrelationship between CO2 emissions and renewable energy consumption on economic growth in G20 countries. It employs the Panel Vector Autoregression (VAR) approach, covers a period from 1990 to 2022, and involves several fundamental stages. These include the unit roots test to see if the data is statistically sound, the cointegration test to see how the variables have changed over time, and the impulse response function test and variance decomposition to see how shocks to one variable affect other variables. The study's findings show a relationship among CO2 emissions, renewable energy consumption, and economic growth. The data indicate that CO2 emissions have a favourable immediate impact in the short term, resulting in higher GDP and greater economic activity, than C0 emissions and GDP are negative in the long term. Furthermore, we confirm that the short-term relationship between renewable energy consumption and GDP is positive; in contrast, using renewable energy sources does not positively impact economic expansion in the long run. Therefore, G20 countries need to take action to formulate renewable energy policies for economic growth to achieve sustainable development and reduce CO2 emissions while promoting economic growth, whether short-term or long-term.