Unraveling the Interrelationship of Digitalization, Renewable Energy, and Ecological Footprints within the EKC Framework: Empirical Insights from the United States

Abstract

The study seeks to better comprehend the ecological footprint of the United States by analyzing the effects of digital financial inclusion (FinTech) as well as renewable and non-renewable energy usage. Data from 2005 Q1 to 2020 Q4 were analyzed using the quantile autoregressive lag (QARDL) method. It also used Granger causality in quantiles to analyze the correlation between variables and draw conclusions about their relative importance. Quantile-wise, the error correction parameter is statistically significant with the predicted negative sign, as shown by the results obtained using the QARDL method. Indications are mounting that the relationship between these variables and the United States’ ecological footprint is returning to its long-term equilibrium. However, in the long/short-run period, across all quantiles, economic growth and consumption of non-renewable energy have a positive impact on the ecological footprint. The environmental Kuznets curve (EKC) theory was also examined, which holds that an inverted U-shaped link exists between economic growth and environmental degradation. The QARDL study’s findings corroborated the presence of an EKC in the US, lending credence to the theory that while economic growth at first promotes environmental deterioration, further progress ultimately promotes environmental improvement. The study additionally checked the results of the QARDL test for robustness using the ARDL approach. Recommendations for public policy are included in the paper for consideration by legislators and policymakers.