Towards a less polluted: the impact of governance indicators and renewable energy investments and technology on carbon emissions in european countries

Abstract

The impact of renewable energy technologies and investments in reducing carbon levels is important. This issue has been little addressed so far due to a lack of data. The most important feature of this study is that it examines the impact of renewable energy investments and renewable energy technologies on reducing oil-derived carbon emissions for the first time across 27 European Union countries for the years 2006–2021. Another new aspect of the study is that it divides European countries into two, based on income level, and considers the impact of governance indicators such as regulatory quality, political stability, and democracy on European countries' carbon neutrality targets. For this purpose, the robust Driscoll and Kraay robust estimator panel data method was applied in the study, based on the Hausman test, autocorrelation test, inter-unit correlation test, and heteroscedasticity tests. The findings show that renewable energy investments and technologies help reduce carbon emissions in different models. In addition, although economic growth is beneficial for the environment, it has been determined that it has an increasing effect on carbon emissions in European countries with higher income levels. Trade openness reduces carbon emissions in high-income countries and increases them in low-income countries. Population density contributes to reducing carbon emissions. Overall, the results suggest that European countries need to increase renewable energy investments and support clean technologies to achieve carbon neutrality targets. The study also shows that reducing oil consumption by promoting renewable energy technologies and investments is key for European policymakers to reduce carbon emissions.