CO ₂ Emissions, Renewable Energy and Environmental Regulations in the EU Countries

Abstract

This paper analyses the factors explaining the slight decrease of CO2 emissions in the European Union (EU), recorded during the last period. With a focus on 12 EU countries, we apply a panel data analysis over the period 1990 to 2017 and we investigate the impact of renewable energy share in energy production, and the role of EU environmental regulations, in explaining the level of CO2 emissions. Our static and dynamic panel data analysis points to a negative impact of an increased renewable energy share on CO2 emissions, while there is no clear evidence about the role of environmental regulations. It appears that the 2020 climate and energy package contributed to the reduction of pollution level, while the ratification of the Kyoto protocol by the EU countries had no significant influence. At the same time, our findings validate the environmental Kuznets curve (EKC) hypothesis and the pollution halo (PH) hypothesis, showing that foreign companies export eco-friendly technologies. Our results prove to be robust regarding the use of static fixed and random effects models, of two stages least square models and the use of difference and system Generalized Method of Moments (GMM) frameworks.

Keywords: CO2 emissions; environmental Kuznets curve hypothesis; pollution halo hypothesis; renewable energy production; environmental regulations; panel data analysis

JEL Classification: Q43, Q56, F21