Decarbonization through carbon intensity mitigation: evidence from global and income-based panels

Abstract

Along with emission reduction targets, carbon abatement policies increasingly target the reduction of carbon intensity. In this context, uncovering factors that reduce carbon intensity is a timely research subject and carries significant policy implications. The goal of this study is to explore the dynamic relationships between carbon and energy intensity, renewable energy, economic development, structural transformation, and globalization in a global panel comprising 126 countries and two income-based subpanels. Robust System-GMM estimators indicate that increasing renewable sources in the energy mix can assist countries in mitigating the carbon intensity of electricity generation. Moreover, current results highlight that economic growth is the most effective mitigating factor of carbon intensity at the global level, revealing that on average, countries have managed to decouple economic and pollution (carbon intensity) growth. Results document these links both in the short-and, most importantly, the long-run setting. Other important results reveal that the mitigating effect of renewable energy is stronger with the increase of economic development, whereas structural transformation only decreases carbon intensity in low- and middle-income countries. Consequently, consistent long-term climate policies that promote these mitigating factors and decrease documented driving factors such as energy intensity could work synergistically across multiple SDGs of the 2030 Agenda.