The nexus of renewable energy consumption, CO2 emissions, urbanization, and economic growth : panel evidence from MINT countries 1990-2021

Abstract

In this study, the dynamic relationship between renewable energy, CO2 emissions, urbanization and economic growth in MINT countries (Mexico, Indonesia, Nigeria, and Turkey) from 1990 to 2021 has been analyzed. This study aims to examine the impact of these factors in the short-run and long-run in the framework of sustainable development in the emerging economies. This study used the Panel Autoregressive Distributed Lag (ARDL) model with Panel Pooled Mean Group (PMG) estimator with panel data. The results of the panel unit root tests suggest a mixed order of integration (I(0) and I(1)) while the Pedroni cointegration test confirms that there is a long-run equilibrium relationship between the variables. The results show that the use of renewable energy is positively and significantly related to economic growth in the long-run with the preferred lag length under the assumption that renewable energy is a part of sustainable economic development. It also indicates a positive and significant correlation of CO2 emissions under the same economy growth specifications for the MINT countries, which is strong. These two long-run coefficients are found to be statistically significant depending on the lag order choice and do not stand up to re-estimation done using Cross-Sectional Dependence-robust estimators (CS-ARDL and CCEMG); therefore, the results are considered indicative of directions of the long-run relationship rather than precisely estimated or fully robust effects. Contrastingly, urbanisation is not statistically associated with any economic growth. At the panel level, none of the explanatory variables is statistically significant as it does not explain the economic growth in the short run. The error correction term is negative however, and statistically significant at the 1% level. This coefficient is negative and in the range of -1 to -2 indicating a strong but oscillating (overshooting) adjustment process away from the short-run equilibrium (and towards the long-run equilibrium) from short-run deviations, i.e., not a smooth and monotonic adjustment process. The overall results confirm that the MINT countries are still in the transition phase, the use of renewable energy is part of the long term growth of the economy, but carbon intensive activities are still in wide use. The results show the importance of "balanced policy strategies" that will support the growth of renewable energy sources and promote "sustainable and low-carbon economic growth."