Renewable Energy Consumption, CO2 Emissions, and Economic Growth Nexus: A Simultaneity Spatial Modeling Analysis of EU Countries

This study employed panel spatial simultaneous equations models with a generalized spatial two-stage least squares (GS2SLS) method to explore the three-way linkages among economic growth, carbon emissions, and renewable energy consumption for European Union (EU) countries from 1995 to 2014. Findings indicate that positive spatial correlations of the variables of concern are confirmed across countries. Specifically, the evidence shows that economic growth is stronger spatially correlated than carbon dioxide (CO2) emissions or renewable energy consumption. Our findings demonstrate that the link between economic growth and carbon emissions, and between economic growth and renewable energy consumption is bidirectional. Moreover, the evidence also confirms that the nexus between economic growth and renewable energy consumption is unidirectional. These novel empirical results would help policy makers in designing appropriate environmental and energy policies to fulfill EU targets for economic development and sustainability.