Testing environmental Kuznets curve hypothesis in G7 countries: the role of renewable energy consumption and trade

Abstract

This study has been conducted to examine the impact of trade, economic growth, and renewable energy on environmental degradation in G7 countries. The data consist of the years 1991–2016. We employed the panel unit root test and co-integration test, along with cross-sectional dependence and cross-sectionally augmented IPS unit root test by Pesaran (J Appl Econ 22:265–312, 2007). We also employed dynamic ordinary least squares, fully modified ordinary least squares, and fixed effect ordinary least squares regression. The result concluded that all the variables are co-integrated in the long run and all the variables create a significant effect on CO₂ emission. This study implies that economic growth and trade increases the CO₂ emission in the long run whereas the renewable energy consumption reduces the CO₂ emission in the long run. The result also provides support for the Environmental Kuznets curve hypothesis in G7 countries.