Evaluating Renewable Energy’s Role in Mitigating CO2 Emissions: A Case Study of Solar Power in Finland Using the ARDL Approach

Abstract

This study examines Finland’s increasing investment in solar energy as part of its broader strategy to transition to renewable energy sources. Despite its northern location and limited sunlight during winter months, Finland has effectively harnessed solar power, especially during its long summer days. We conducted a PESTLE analysis, highlighting political commitment to climate agreements, economic benefits of solar energy, public support for clean energy, technological advancements, regulatory support, and environmental benefits. In addition, we applied the autoregressive distributed lag model (ARDL) to study the impact of GDP per capita, urbanization (URB), foreign direct investments (FDI), and the share of primary energy consumption from solar (SOL) on CO2 emissions for Finland during 1990–2022. The long-term findings show that SOL, URB, and FDI negatively impact CO2 emissions, while GDP positively impacts CO2 emissions. Solar energy deployment reflects the effectiveness of solar energy as a cleaner alternative to fossil fuels. Urbanization also shows a negative impact on CO2 emissions due to better infrastructure and more efficient energy use in urban areas. FDI suggests that investments are oriented towards sustainable technologies. Industrial activity associated with economic expansion may indicate the positive effect of GDP in CO2 emissions. Although economic growth has typically resulted in increased emissions, strategic investments in renewable energy and sustainable urban development can greatly reduce this effect. Policy initiatives in Finland should concentrate on promoting green investments and enhancing urban planning with a focus on environmental sustainability.