The interdependence between CO2 emissions, economic growth, renewable and non-renewable energies, and service development: evidence from 65 countries

Abstract

This study examined the interdependence between CO2 emissions, economic growth, energy generation, and value-added service for a panel of 65 countries. An important contribution of this study is to explore the role of service sector development in the mitigation of pollutant emissions, considering renewable energy as a resource of production. The authors used the annual data of studied variables covering the period of 1980 to 2014 and utilized the vector autoregressive (VAR) model, Granger causality, and Toda–Yamamoto tests. The empirics of Granger causality suggest that there are strong bidirectional causalities between CO2 emissions and non-renewable energy, CO2 emissions and value-added service, non-renewable energy and value-added service, and unidirectional causality from CO2 emissions to renewable energy in the short-run. Furthermore, the empirics suggest that bidirectional causalities exist between the service sector toward CO2 emissions and value-added service toward non-renewable energy in the long-run. The findings of this study support the validity of an environmental Kuznets curve for the case of sample countries. The study proposed that increasing renewable energy rates could be good plans to stimulate service activities and decreasing non-renewable energy rates will reduce pollutant emissions.