On the nexus of CO2 emissions and renewable and nonrenewable energy consumption in Europe: A new insight from panel smooth transition

Abstract

This study seeks, within the extended framework of the so-called environmental Kuznets curve (EKC), to analyse the nonlinear effect of economic growth and energy consumption on environmental pollution (measured by CO2 emissions) in 30 countries, over the period 2000 – 2018. The panel smooth transition regression (PSTR) model is used to allow such a relationship between variables in different economic regimes to be determined. According to the analysis results, this study strengthens the idea that the relationship can be described as a shaped business cycle, in which economic growth first increases environmental degradation, and then, after a certain growth (income) level has been reached, reduces it. This business cycle relationship suggests that environmental improvements will eventually occur as economies grow. Another implication of these results is the importance of using energy in a greener way to combat climate change and to sustain economic development.