Many studies in the literature confirm the validity of the technique effect, which improves the quality of the environment by investigating whether an inverted U-shaped relationship exists between environmental pollution and economic growth. Ignoring the role of the technological obsolescence effect, which may also exert influence on an economy, these studies reach an optimistic conclusion for growth policies. By controlling renewable energy, this study examines the existence of the obsolescence effect by constructing an N-shaped relationship between economic growth and environmental degradation for the most vulnerable countries in the Mediterranean region to climate change. We conducted a battery of cross-sectional dependence tests, second-generation panel unit root, and cointegration tests in 17 selected Mediterranean countries covering 1990-2017. The results provide evidence of an N-shaped relationship between economic growth and environmental degradation. The study provides important policy recommendations and discusses how renewable energy can be deployed to reduce CO2 emissions.
Keywords: Carbon emissions; Cointegration; Cross-sectional dependence; Mediterranean countries; Panel data; Renewable energy.
© 2021. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.