CO₂ Emissions, Manufacturing Growth and Renewable Energy Consumption Relationship in OECD Countries: Empirical Evidence from ARDL Model

Abstract

Energy affects all areas of daily life. Especially with the industrial revolution, the fact that manufacturing has become the engine of economic growth has led to a rise in energy consumption. In this process, the countries of the world have increased their economic growth with traditional energy consumption, and this has increased carbon emissions. However, to fulfill the sustainable development goals, both the continuation of economic growth and the reduction of carbon emissions are required. In this context, the substitution of renewable energy consumption in place of traditional energy sources has started to be discussed. The aim of this study is to research the relationships among CO₂ emissions, manufacturing growth, and renewable energy consumption. For this aim, the relationship among carbon emissions, manufacturing growth, and renewable energy consumption is analyzed for the period 1997–2019 in 38 Organisation for Economic Co-operation and Development (OECD) countries. With respect to the findings of autoregressive distributed lag (ARDL) test results, manufacturing growth enhances CO₂ emissions both in the short and long terms. As the proportion of renewable energy consumption in total energy consumption rises, CO₂ emissions decrease both in the short and long terms. On the other hand, according to the Dumitrescu–Hurlin causality test results, there is a one-way causality relationship from carbon emissions to manufacturing growth and from renewable energy consumption to carbon emissions. When the findings are evaluated together, it is understood that renewable energy consumption is a substantial factor in tackling the deadlock of lessening the carbon emissions without adversely impacting manufacturing growth. Therefore, policymakers need to encourage renewable energy consumption.

Citation

Tufaner, M.B. and Sozen, I. (2024), "CO₂ Emissions, Manufacturing Growth and Renewable Energy Consumption Relationship in OECD Countries: Empirical Evidence from ARDL Model", Andrei, J.V. and Grigorescu, A. (Ed.) Emerging Patterns and Behaviors in a Green Resilient Economy (Lab for Entrepreneurship and Development), Emerald Publishing Limited, Leeds, pp. 61-75. https://doi.org/10.1108/978-1-83549-780-720241004