The Relationship between CO2 Emissions, Economic Growth, Labor Force, Digitalization, Urbanization and Renewable Energy Consumption: Evidence from the EU and Selected Developing Countries

Abstract

This research deals with the relationship between CO₂ emissions and economic growth, labor force, digitalization, urbanization rate, and renewable energy consumption. In this context, the period covering 1994–2020 in 26 European Union (EU) member states and nine leading developing countries was estimated using Pearson correlation, panel cointegration, regression, and heterogeneous causality analyses. Research findings have shown that economic growth increases CO₂ emissions and environmental degradation. The analysis estimates showed the negative impact of economic growth on environmental quality in both EU members and developing countries. For this reason, the dissemination of environmentally friendly production and techniques is necessary for both groups of countries. At the panel level, the impact of the workforce on CO₂ emissions is positive. We found that renewable energy consumption increases environmental quality for both groups of countries. The findings, both by the panel and by country, on the impact of urbanization and digitalization on CO₂ emissions are complex. The results revealed that environment-based digital transformation is not at the desired level for most countries in the sample. Causality analysis showed a bidirectional causality between growth, labor, and CO₂ emissions. There is a one-way causality from digitalization, urbanization rate, and renewable energy consumption to CO₂ emissions.