Investigating the EKC hypothesis with renewable energy, nuclear energy, and R&D for EU: fresh panel evidence

Abstract

The European Union (EU) is extremely concerned about the environmental harm caused by rising CO₂ emissions and other factors. The EU has to uncover factors that decrease pollution before it's too late to achieve long-term sustainable growth. The paper applies the environmental Kuznets curve (EKC) hypothesis to examine the dynamic connection between GDP, energy use, energy intensity, research and development (R&D), and CO₂ emissions. Data from 34 countries in the EU, spanning from 1990 to 2021, were applied. EU countries are very interdependent on one another due to tourism, trade, education, religion, and culture. Therefore, tests for cross-sectional dependency (CSD) and slope heterogeneity (SH) are used in this research. After establishing the presence of CSD and SH issues, the study employed second-generation unit root and cointegration tests. In response to these concerns, the study implemented a novel cross-section autoregressive distributed-lag model (CS-ARDL) method. There exists a U-shaped quadratic link between environmental pollution and wealth. That rules out the existence of the EKC hypothesis in the EU. This means that when income grows, pollution will drop up to a certain point, and then it will begin to climb again. Long-term pollution is reduced by the use of renewable energy and R&D. On the other hand, energy intensity increases CO₂ emissions. The article also applied the CCEMG, AMG, and MG estimators to test the robustness. The CS-ARDL methodology demonstrates that increasing national income, nuclear energy, and investment in R&D alone will not be sufficient to fulfill environmental needs and that the use of alternative renewable energy sources is the greatest approach to mitigate environmental deterioration in the EU. The AMG, MG, and CCEMG estimators all agree that switching to renewable energy is the most effective strategy to lower emissions. This research offers crucial guidelines for advancing environmental policy and realizing sustainable development. Discussion, policy recommendations, and future research based on the findings are presented.

Keywords: CO2 emissions; CS-ARDL approach; EKC; Environmental degradation; Nuclear energy; Renewable energy consumption.