G-20 economies and their environmental commitments: Fresh analysis based on energy consumption and economic growth

Abstract

The impact of economic growth and energy use is still controversial regarding sustainability, and researchers have limited consensus in this regard. Electricity is considered more environmentally friendly compared with direct fossil fuel consumption. However, many developed economies still depend on fossil fuel sources for electricity generation. Therefore, this study attempted to verify the relationship between electricity consumption and carbon emissions in developed economies in the Group of Twenty (G20). Economic growth and foreign direct investment are other important variables for analyzing this relationship. For this purpose, a dataset from 1995–2018 was generated. The study used econometric methods including cross-sectional dependence, cointegration, Fully Modified Ordinary Least Square Dynamic Ordinary Least Square estimators, and the Pair-wise panel Granger causality test to view the latest picture of the relationship between dependent and independent factors. Surprisingly, the outcome of electricity consumption showed a positive relationship with the growth of CO2. This indicates that electricity production is still dependent on sources that help increase CO2 emissions in G20 countries. Furthermore, the outcomes of gross domestic product and its square term confirm the notion of the Environmental Kuznets Curve for these economies. These results suggest that policymakers promote green and clean electricity sources for sustainable economic growth.