Environmental costs and renewable energy: re-visiting the Environmental Kuznets Curve

Abstract

The environmental costs of economic development have received increasing attention during the last years. According to the World Energy Outlook (2013) sustainable energy policies should be promoted in order to spur economic growth and environmental protection in a global context, particularly in terms of reducing greenhouse gas emissions that contribute to climate change. Within this framework, the European Union aims to achieve the "20-20-20" targets, including a 20% reduction in EU greenhouse gas emissions from 1990 levels, a raise in the share of EU energy consumption produced from renewable resources to 20% and a 20% improvement in the EU's energy efficiency. Furthermore, the EU "Energy Roadmap 2050" has been recently adopted as a basis for developing a long-term European energy framework, fighting against climate change through the implementation of energy efficiency measures and the reduction of emissions. This paper focuses on the European context and attempts to explain the impact of economic growth on CO2 emissions through the estimation of an Environmental Kuznets Curve (EKC) using panel data. Moreover, since energy seems to be at the heart of the environmental problem it should also form the core of the solution, and therefore we provide some extensions of the EKC by including renewable energy sources as explanatory variables in the proposed models. Our data sets are referred to the 27 countries of the European Union during the period 1996-2010. With this information, our empirical results provide some interesting evidence about the significant impacts of renewable energies on CO2 emissions, suggesting the existence of an extended EKC.

Keywords: Environmental Kuznets Curve; European Union; Panel data model; Renewable energies.