Nexus between carbon emissions, renewable energy, technological innovation, and economic growth in the G7 economies: an econometric analysis

Abstract

This research investigates the relationship among CO \(_2\) emissions, economic growth, technological innovation, renewable energy consumption, and the Environmental Kuznets Curve (EKC) in G7 countries from 1990 to 2022. The overarching objective is to uncover specific short-run and long-run associations between these variables, examining immediate impacts and long-term effects. With global concerns related to climate change and concerted international efforts to reduce CO$_2$, this study explores the critical dynamics between economic growth and environmental sustainability. The methods include panel unit root tests, cointegration analysis, causality tests, and AutoRegressive Distributed Lag (ARDL) models, chosen for their capacity to offer a thorough understanding of the relationships between the variables. The finding indicates a stable equilibrium between GDP and CO$_2$ emissions within G7 nations, signifying a crucial aspect of global climate change. Specifically, the results highlight that the relationship is statistically significant for the USA, Canada, Germany, and the UK while being deemed insignificant for Italy, France, and Japan. This study suggests a complex relationship that extends beyond short-run fluctuations. In the short term, an observed inverse correlation emphasizes the need for agile policy strategies to balance economic growth and environmental concerns. Promoting renewable energy sources and strategically increasing investment in research and development have policy implications that can help make economic growth and environmental concerns more sustainable and balanced.