How Do R&D and Renewable Energy Consumption Lead to Carbon Neutrality? Evidence from G-7 Economies

Abstract

The discussion about whether research and development and advanced energy structure can efficiently control pollution has gained the consideration of researchers across the globe. However, there is a lack of enough empirical and theoretical evidence to support this phenomenon. To offer support of empirical evidence along with theoretical mechanism, we examine the net Impact of research and development (R&D) and renewable energy consumption (RENG) on CO2E utilizing panel data from G-7 economies for 1990–2020. Moreover, this study investigates the controlling role of economic growth and nonrenewable energy consumption (NRENG) in the R&D-CO2E models. The results obtained from the CS-ARDL panel approach verified a long-run and short-run relationship between R&D, RENG, economic growth, NRENG, and CO2E. Short- and long-run empirical results suggest that R&D and RENG improve environmental stability by decreasing CO2E, while economic growth and NRENG increase CO2E. Particularly, long-run R&D and RENG reduce CO2E with the effect of −0.091 and −0.101, respectively, while in the short run, they reduce CO2E with the effect of −0.084 and −0.094, respectively. Likewise, the 0.650% (long run) and 0.700% (short-run) increase in CO2E is due to economic growth, while the 0.138% (long run) and 0.136% (short run) upsurge in CO2E is due to an increase in NRENG. The findings obtained from the CS-ARDL model were also verified by the AMG model, while D-H non-causality approach was applied to check the pair-wise relationship among variables. The D-H causal relationship revealed that policies to focus on R&D, economic growth, and NRENG explain variation in CO2E but not vice versa. Furthermore, policies considering RENG and human capital can also affect CO2E and vice versa, meaning there is a round effect between the variables. All this indication may guide the concerned authorities to devise comprehensive policies that are helpful to environmental stability and in line with CO2E reduction.