The interaction effect of renewables, economic and industrial development on CO2 emissions in top solar energy producers

Abstract

Abstract This study examined the interaction effect of renewable energy use, industrial and economic growth on CO2 emissions, and the individual effect of these variables on CO2 across 44 countries that highly produce and consume solar energy from 1996 to 2018. Cross-sectionally augmented distributed lags (CS-DL), cross-sectionally augmented autoregressive distributed lags (CS-ARDL) and other methods were employed. Findings reveal that solar energy use reduces CO2, while economic and industrial development positively affects CO2. The interaction effect from both renewable energy and economic growth, renewable energy and industrial development, and industrial and economic development negatively affects CO2 in the long term. Total renewable energy use, solar energy use, and industrial development positively affect economic growth. The impact of renewable energy and solar energy is significant in the long term. In the ten-year forecast, solar energy use and industrial development will have the least contribution to CO2, while total renewable energy consumption and solar energy use will have the least share of economic growth. Causality results strengthen the impact of renewable energy, solar energy, and economic growth on CO2, by showing the direct effect on CO2, while industrial development has a neutral effect on CO2. Solar energy and industrial development have a direct effect on economic growth while economic growth causes renewable energy consumption. The interacting feedback causal effect was noted between the interaction of renewable energy and economic growth and CO2. Based on the results, we suggested the policy implication to strengthen the effect of renewables, industrial and economic growth, and their interaction to reduce CO2 emissions.