The influence of renewable energy on economic sustainability and greenhouse gas emissions

Abstract

This study explores how renewable energy adoption impacts economic growth and greenhouse gas emissions, addressing the critical question of whether renewable energy sources (RESs) foster sustainable economic development while reducing environmental harm. Amid concerns over depleting fossil fuels and escalating pollution, renewable energy offers a sustainable alternative to support economic progress and mitigate climate change. The research employs a structural vector auto-regression (SVAR) model to analyze the effects of increased renewable energy use in middle-income countries (MICs) and high-income countries (HICs). Data from the Energy Information Administration and World Bank classifications underpin the analysis, focusing on key variables: renewable energy consumption, GDP, and CO2 emissions. The study reveals that renewable energy positively influences economic growth in both MICs and HICs, with short- and long-term benefits. Notably, renewable energy contributes more significantly to the green economy in MICs than in HICs, driven by higher untapped potential in these regions. However, the findings indicate that renewable energy adoption does not consistently reduce CO2 emissions in MICs due to their limited share in the energy mix and reliance on outdated technologies. Key findings underscore the need for policies to enhance renewable energy’s share in energy portfolios to boost economic growth and environmental sustainability, particularly in MICs where potential remains underutilized.