NEXUS BETWEEN RENEWABLE ENERGY AND CARBON DIOXIDE EMISSIONS: EVIDENCE FROM THE INSTITUTIONAL THRESHOLD EFFECT

Abstract

A remarkable feature of empirical investigations on the renewable energy effect on carbon dioxide is that not many studies reveal the distinct levels of institutional development; in other words, the precise alignment of institutions in mediating the influence of renewable energy on carbon dioxide emissions. To overcome this shortcoming, this paper examines the role of institutions in mediating the influence of renewable energy on carbon dioxide emissions. Forty-six selected countries are included in this study. The data are collected yearly from 1998 to 2019. Using the dynamic panel threshold methods, the results show a threshold effect in the relationship between renewable energy and carbon dioxide emissions; renewable energy impacts carbon dioxide emissions after institutional development attained a certain threshold level. The findings suggest that strong institutions may promote the nexus between renewable energy and carbon dioxide emissions and that policymaker supports the functioning of renewable energy in hindering long-run  emissions intensity.