Renewable energy and ecological footprint nexus: Evidence from dynamic panel threshold technique

Abstract

The escalating phenomenon of environmental degradation is an urgent global concern, imperiling ecosystems and hindering the prospects for sustainable development on a planetary scale. Therefore, this study aims to explore the intricate interplay between renewable energy (RE) and ecological footprint (EF), considering the conditional impact of fiscal capacity (FIC), human development (HDI), institutional quality (IQI), and population density (PDN). Drawing on panel data encompassing 74 developing countries from 2000 to 2022, the study employs a dynamic panel threshold regression method, both with and without an instrumental variable approach. The findings unveil a non-linear nexus between RE and EF, revealing significant threshold values for FIC (1.870), HDI (0.736), and IQI (0.311), above which RE showcases its efficacy in mitigating EF. Conversely, when these predictors dip below the thresholds of FIC (1.391), HDI (0.655), and IQI (0.2545), the impact of RE on FE becomes insignificant. Moreover, the study introduces PDN as an additional threshold variable in the analysis, pinpointing that the effectiveness of RE in reducing EF hinges on PDN being below a threshold value of 263.144; however, above a threshold value of 276.98, the influence of PDN on the RE-FE nexus diminishes. The findings underscore the complexity of policy landscapes in developing countries. They suggest that while promoting renewable energy is pivotal for environmental sustainability, it is equally imperative to bolster existing environmentally friendly fiscal capacity, advance human capital, enhance institutional quality, and craft effective population distribution policies.

Keywords

• Renewable energy
• Ecological footprint
• Human development
• Institutional quality
• Population density