The asymmetric effects of renewable energy consumption and trade openness on carbon emissions in Sweden: new evidence from quantile-on-quantile regression approach

Abstract

With the passage of time, the continued burning of fossil fuels is proving to be one of the world's most serious issues. In response, the current research aims to assess the critical linkage between carbon emissions and renewable energy, trade openness, and economic growth in Sweden utilizing a dataset from 1965 to 2019. The study applied the novel quantile-on-quantile regression (QQ) approach to assess this relationship. The main objectives are to address the following questions: (i) What are the effects of trade openness on CO₂ emissions in each quantile? (ii) Does renewable energy consumption mitigates CO₂ emissions in each quantile? What is the impact of economic growth on CO₂ emissions in each quantile? The outcomes from the QQ approach revealed that at low and medium quantiles (0.1-0.6), the effect of trade openness on CO₂ emissions is negative. Furthermore, at lower and higher quantiles (0.1-0.90) of combination of renewable energy consumption and CO₂ emissions, the effect of renewable energy consumption on CO₂ emissions is negative. Finally, at majority of the quantiles, the effect of economic growth on CO₂ emissions is negative. Moreover, the present study applied the quantile regression (QR) approach as a robustness check. The findings of the QR validate the findings of the QQR approach. The study proposes that policy-makers in Sweden should place greater emphasis on raising public awareness regarding the issues of renewable energy since it mitigates environmental degradation.

Keywords: CO2 emissions; Economic growth; Quantile-on-quantile regression; Renewable energy consumption; Sweden; Trade openness.