Received: 18 March 2019

| Revised: 23 October 2019

| Accepted: 29 October 2019

DOI: 10.1111/twec.12898

ORIGINAL ARTICLE

How renewable energy consumption lower global

CO2 emissions? Evidence from countries with
different income levels

Kangyin Dong1,2 | Xiucheng Dong1,2 | Qingzhe Jiang1,2

1
School of International Trade and Economics, University of International Business and Economics, Beijing, China
2
UIBE Belt & Road Energy Trade and Development Center, University of International Business and Economics, Beijing,
China

Funding information
National Social Science Foundation of China, Grant/Award Number: 18VDL017

KEYWORDS
CO2 emissions, cross-sectional dependence, income disparity, renewable energy, slope heterogeneity

1 | IN T RO D U C T ION

The last few decades have witnessed rapidly rising energy consumption across the globe, with a strong
boom from 8,588.9 million tonnes oil equivalent (Mtoe) in 1995 to 13,147.3 Mtoe in 2015 (Figure 1),
based on statistics from BP (formerly British Petroleum; BP, 2018). In global energy consumption,
fossil fuel-based energies are the leading forms (Sinha, Shahbaz, & Balsalobre, 2017), providing ap-
proximately 86.0% of the global total energy needs (BP, 2018). Meanwhile, the rapidly increasing en-
ergy consumption and fossil fuel-based energy structure have triggered tremendous challenges related
to environmental pressures across the globe, in particular carbon dioxide (CO2) emissions mainly
emitted from fossil fuel burning. The statistics from BP clearly support this. Global CO2 emissions
have increased dramatically, by approximately half, from 22,188.5 million tonnes in 1995 to 33,508.4
million tonnes in 2015, with an annual average rate of 2.1% (BP, 2018).
Consequently, the global community has started to pay attention to the environmental problems
associated with increasing CO2 emissions, and in that pursuit, many nations around the world are pro-
gressively recognising the prospects and implications of renewable energies, including hydropower,
solar, wind, geothermal, biomass and other forms (Sinha et al., 2017). Simultaneously, renewable
energy consumption and its share in total energy needs are rapidly increasing. According to statistics
from BP (2018), global renewable energy consumption has increased by more than two times, from
599.1 Mtoe in 1995 to 1,257.8 Mtoe in 2015, providing about 9.6% of the global total energy needs
(Figure 1). Moreover, based on the International Energy Agency's (IEA) World Energy Outlook 2017
(IEA, 2017c), global renewable energy consumption will increase to 3,467 Mtoe in 2040, providing
approximately 19.7% of the global total energy needs (Figure 1). Along with the enormous demand

World Econ. 2020;43:1665–1698. wileyonlinelibrary.com/journal/twec © 2019 John Wiley & Sons Ltd | 1665
1666
|    DONG et al.

25,000
Coal 2040
History Future 2035
Oil
Gas
2025
20,000 Nuclear
Renewables
2015
Energy consumption (Mtoe)

15,000 2005

1995

10,000

5,000

0
1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Year

F I G U R E 1 History and future trend of the global primary energy mix in 1995–2040
Note: The grey, yellow, blue, black and green colours denote coal, oil, gas, nuclear and renewables, respectively.
Data source: The data covering 1995–2015 are from the BP Statistical Review of World Energy 2017 (BP, 2018),
while the data between 2020 and 2040 are collected from the forecast results under the New Policies Scenario (NPS)
of the IEA World Energy Outlook 2017 (IEA, 2017c) [Colour figure can be viewed at wileyonlinelibrary.com]

for renewable energy and the rapidly increasing CO2 emission levels, further investigation of the emis-
sion–growth–renewables nexus at the global level is particularly useful for mitigating global warming
by promoting growth in renewable energy.
Furthermore, as shown in Figure 2, significant differences exist in CO2 emissions and income lev-
els across the globe. According to the World Bank (2017a), countries worldwide can be classified into
four income-based subpanels: high-income (HI), upper-middle-income (UMI), lower-middle-income
(LMI) and low-income (LI) subpanels. From Figure 2, we note that the countries in the HI subpanel
are in general richer than the countries in other subpanels, confirming the existence of significant
differences in income levels across the globe. Considering this difference in income levels across the
countries, it is of great significance to investigate whether the effect of renewable energy consumption
on CO2 emissions differs across countries with different income levels. Nevertheless, most previous
studies have overlooked the differences in the effect of renewable energy consumption on CO2 emis-
sions in countries with different income levels, which can create inconsistent estimates or even result
in misleading conclusions (Breitung, 2005; Grossman & Krueger, 1995).
Under these circumstances, this study investigates the emission–growth–renewables nexus and
tests the environmental Kuznets curve (EKC) hypothesis for a broad sample of 120 countries cov-
ering 1995–2015 by incorporating additional explanatory variables as control variables, including
non-renewable energy consumption, economic structure, urbanisation level and trade openness. In
DONG et al.   
| 1667

4
HI subpanel
UMI subpanel
LMI subpanel
LI subpanel
2
In CO2

–2

–4
6 7 8 9 10 11 12
In GDP

F I G U R E 2 The distribution of global CO2 emissions and per capita GDP in countries with different income
levels in 2015
Note: The detailed two-letter abbreviation of the 120 countries is listed in Table A1 in the Appendix.
Data source: World Bank (2017b) [Colour figure can be viewed at wileyonlinelibrary.com]

addition, to empirically investigate whether the effect of renewable energy consumption on CO2
emissions differs across countries with different income levels, the 120 countries are classified into
four income-based subpanels, and the four subpanels are separately analysed. Additionally, given the
cross-sectional dependence and slope heterogeneity that may exist within the panel data, a series of
econometric techniques allowing for cross-sectional dependence and slope heterogeneity is utilised
here.
This study contributes to the existing emission–growth–renewables literature in two aspects. First,
considering the significant differences in income levels of countries, in addition to the global panel,
the emission–growth–renewables nexus in countries with different income levels (i.e., HI, UMI, LMI
and LI subpanels) is also investigated. This is particularly useful for exploring the regional differ-
ences in the effect of renewable energy consumption on CO2 emissions. Accordingly, policymakers
in the global panel and various subpanels can devise effective and targeted policies for tackling CO2
emissions. Second, most previous studies have ignored cross-sectional dependence and slope hetero-
geneity, which can result in biased and inconsistent estimates. In contrast, the findings of this study
provide a more robust analysis as the recent econometric approaches that are robust to cross-sectional
dependence and slope heterogeneity are utilised in this study.
The rest of this study is structured as follows. Section 2 reviews the relevant literature. Section 3
discusses the model and data. Section 4 details the estimation techniques. Section 5 reports the empir-
ical results. Section 6 further discusses the main findings. Section 7 presents conclusions and policy
implications.
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|    DONG et al.

2 | L IT E R AT U R E R E V IE W

2.1 | Studies on emission, growth and the EKC nexus

Since the EKC hypothesis was first proposed by Grossman and Krueger (1991), it has contributed
to analysis of the relationship between economic growth and environmental quality and become one
of the most popular hypotheses in environmental economics (Atasoy, 2017). Subsequently, numer-
ous scholars have started to examine the EKC hypothesis using various econometric approaches on
data sets across various regions of the globe (the earlier literature, e.g., Beckerman, 1992; Dinda,
2004; Grossman & Krueger, 1991, 1995; Heil & Selden, 2001; Holtz-Eakin & Selden, 1995; Stern,
Common, & Barbier, 1996; the recent literature, e.g., Alam, Murad, Noman, & Ozturk, 2016; Bilgili,
Koçak, & Bulut, 2016; Danish, Zhang, Wang, & Wang, 2017; Gani, 2012; Kang, Zhao, & Yang,
2016; Mrabet & Alsamara, 2017; Ulucak & Bilgili, 2018) and provided ambiguous empirical results
concerning the validity of the EKC hypothesis.
For example, using three air pollutants for 42 countries, Grossman and Krueger (1995) report an
inverted U-shaped relationship between economic growth and environmental degradation. Similarly,
Alam et al. (2016), Ali, Abdullah, and Azam (2017), Arouri, Ben Youssef, M'henni, and Rault (2012),
Danish et al. (2017), Ekins (1997), Gani (2012), Kang et al. (2016), Mrabet and Alsamara (2017),
Saboori and Sulaiman (2013), Selden and Song (1994) and Stern et al. (1996) validate the EKC
hypothesis. In contrast, Holtz-Eakin and Selden (1995) fail to validate the EKC hypothesis; similar
results are found by Azlina, Law, and Mustapha (2014), Roberts and Grimes (1997), Squalli (2017)
and Zoundi (2017).

2.2 | Studies on emission–growth–renewables nexus

( )
In recent literature, to extend the basic EKC model (i.e., CO2 = f GDP, ,GDP2 ), a growing body
of scholars has examined the EKC hypothesis by incorporating additional explanatory variables
(Balsalobre-Lorente, Shahbaz, Roubaud, & Farhani, 2018). Accordingly, numerous studies have fo-
cused on the CO2 emissions, economic growth and renewable energy nexus (e.g., Bento & Moutinho,
2016; Bilgili et al., 2016; Dogan & Seker, 2016a; Dong, Dong, & Dong, 2019; Irandoust, 2016; Ito,
2017; Jaforullah & King, 2015; Jebli, Youssef, & Ozturk, 2016; Li & Su, 2017; Mehdi and Slim,
2017; Moutinho & Robaina, 2016; Paramati, Mo, & Gupta, 2017; Saidi & Mbarek, 2016), which can
be further divided into three groups. The first strand of these studies focuses on the nexus between
renewable energy and economic growth. Unidirectional causality running from economic growth to
renewable energy is found by Azlina et al. (2014), similar to studies such as Bento and Moutinho
(2016) for Italy, Irandoust (2016) for four Nordic countries and Paramati, Mo et al. (2017) for de-
veloping economies in the G20 countries. In contrast to this finding, Zeb, Salar, Awan, Zaman, and
Shahbaz (2014) reveal reverse causality in India, which coincides with Saidi and Mbarek (2016)
for nine developed countries and Bhattacharya, Churchill, and Paramati (2017) for 85 economies.
In addition, Apergis and Payne (2014) detect bidirectional causality running between renewable
energy and economic growth. The same results are reported by Lin and Moubarak (2014) for China
and Jebli et al. (2016) for 25 Organisation for Economic Cooperation and Development (OECD)
countries.
The second strand of studies illustrates the relationship between renewable energy and CO2 emis-
sions. Apergis, Payne, Menyah, and Wolde-Rufael (2010), Zeb et al. (2014), Jaforullah and King (2015),
Bilgili et al. (2016) and Bélaïd and Youssef (2017) discover unidirectional causality running from
DONG et al.   
| 1669

renewable energy to CO2 emissions, while Menyah and Wolde-Rufael (2010), Lin and Moubarak (2014)
and Sebri and Ben-Salha (2014) find reverse causality. In contrast to these findings, Apergis and Payne
(2014) find a bidirectional causal relationship running between renewable energy and CO2 emissions
among seven Central American countries. Similar results are obtained by Dogan and Seker (2016a) for
15 European countries, Jebli et al. (2016) for 25 OECD countries and Danish et al. (2017) for Pakistan.
The third strand of studies presents the economic growth and CO2 emissions nexus. Using the au-
toregressive distributed lag (ARDL) approach to investigate Indonesia's case, Sugiawan and Managi
(2016) indicate unidirectional causality running from economic growth to CO2 emissions. In addition,
they confirm the existence of EKC for Indonesia in the long run. In contrast to this finding, the vector
error correction model (VECM) Granger causality technique employed by Lin and Moubarak (2014)
indicates neutrality between economic growth and CO2 emissions for the case of China.

2.3 | Studies on factors affecting CO2 emissions

In addition to the above two factors (i.e., economic growth and renewable energy consumption; see
Sections 2.1 and 2.2), other factors affecting CO2 emissions have been the focus in recent research.
For example, many studies have explored the dynamic relationship among CO2 emissions, economic
growth and non-renewable energy consumption (e.g., Al-Mulali, Saboori, & Ozturk, 2015; Apergis
et al., 2010; Chen, Wang, & Zhong, 2019; Dogan & Seker, 2016b; Farhani, Chaibi, & Rault, 2014;
Hamit-Haggar, 2012; Hatzigeorgiou, Polatidis, & Haralambopoulos, 2011; Inglesi-Lotz & Dogan,
2018; Narayan & Doytch, 2017; Ozcan, 2013), indicating that the use of non-renewable energy is
the main contributor to CO2 emissions. Furthermore, according to Lin and Chen (2018), economic
structure is frequently defined as the proportion of secondary industry in the whole economy and
presented as an important factor affecting CO2 emissions. This viewpoint is also confirmed by Chen,
Wang, Cui, Huang, and Song (2018), Dong, Hochman, and Timilsina (2018), Feng, Davis, Sun, and
Hubacek (2015), Mi et al. (2017) and Xu and Lin (2015). Moreover, as Sinha et al. (2017) indicate,
the urbanisation level can play a significant role in influencing CO2 emissions via various channels.
Similarly, Bai, Deng, Gibson, Zhao, and Xu (2019), He, Xu, Shen, Long, and Chen (2017), Liu and
Bae (2018), Wang et al. (2016), Xu and Lin (2015) and several other studies have investigated the
urbanisation–emissions nexus and explored the effect of the urbanisation level on CO2 emissions. In
addition, according to Balsalobre-Lorente et al. (2018) and Sinha et al. (2017), trade openness also
can be considered an effective determinant of CO2 emissions, but the impact can be either positive or
negative; the dynamic causal linkages between these two variables are also tested in previous works,
such as Fernández-Amador, Francois, and Tomberger (2016), Kasman and Duman (2015), Liobikienė
and Butkus (2019), Mutascu (2018) and Shahbaz, Nasreen, Ahmed, and Hammoudeh (2017).

2.4 | Literature gap

Overall, the above literature review suggests that although numerous studies have focused on the dy-
namic causal linkages among CO2 emissions, economic growth and renewable energy consumption
for different countries or regions, the relevant literature is scarce at the global level. Moreover, to the
best of our knowledge, very few studies have compared the effect of renewable energy consumption
on CO2 emissions across various income-based subpanels. In addition, previous studies have ignored
the cross-sectional dependence and slope heterogeneity that may exist within the panel data and, thus,
may result in misleading findings.
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|    DONG et al.

3 | M O D EL CON ST RU C T IO N AND DATA

3.1 | Empirical model

This study aims to explore the linkages among economic growth, renewable energy consumption and
CO2 emissions across the globe and determine whether the linkages observed in the three variables
differ across countries with different income levels. Moreover, as Grossman and Krueger (1991)
postulate, an inverted U-shaped relationship exists between economic growth and environmentally
harmful emissions (i.e., EKC hypothesis). Consequently, based on the conventional EKC framework,
the multivariate framework utilised in this study is as shown in Equation (1):
( )
CO2it = f GDPit, ,GDP2it ,REit ,Zit . (1)

As many scholars (Dong, Hochman, Zhang, et al., 2018; Shahbaz & Lean, 2012; Shahbaz, Sarwar,
Chen, & Malik, 2017) indicate, the empirical evidence obtained by a log-linear specification is con-
siderably more efficient and reliable than that of a simple linear specification. Therefore, to avoid
possible structural problems of error term distribution (Qiao, Chen, Dong, & Dong, 2019), all the
variables are transformed into natural-log forms; Equation (1) can be rewritten as follows:

( )2
ln CO2it = 𝛽0 + 𝛽1 ln GDPit + 𝛽2 ln GDPit + 𝛽3 ln REit + 𝛽4 ln Zit + 𝜇it , (2)

where subscripts i and t denote country and year, respectively; 𝛽1 − 𝛽4 are the parameters to be estimated;
𝛽0 is a constant term; and μ is a random error term. CO2 represents per capita CO2 emissions, GDP de-
scribes per capita gross domestic product (GDP), RE indicates per capita renewable energy consumption,
and Z denotes a series of control variables, which are proxied by four variables after a thorough inves-
tigation into prior studies (see Section 2.3): non-renewable energy consumption (i.e., NRE), economic
structure (i.e., ES), urbanisation level (i.e., URB) and trade openness (i.e., TO). Thus, Equation (2) can be
rewritten as shown in Equation (3):

( )2
ln CO2it = 𝛽0 + 𝛽1 ln GDPit + 𝛽2 ln GDPit + 𝛽3 ln REit + 𝛽4 ln NREit
(3)
+𝛽5 ln ESit + 𝛽6 ln URBit + 𝛽7 ln TOit + 𝜇it ,

where 𝛽1 − 𝛽7 are the parameters to be estimated. In this equation, if the EKC hypothesis holds, 𝛽1 > 0 and
𝛽2 < 0. Following the discussion in Section 2, this study assumes that CO2 emissions are positively af-
fected by non-renewable energy consumption, economic structure, urbanisation level and trade openness,
while renewable energy consumption has a negative effect on CO2 emissions. Thus, we expect 𝛽3 < 0,
𝛽4 > 0, 𝛽5 > 0, 𝛽6 > 0 and 𝛽7 > 0.

3.2 | Data and preliminary analysis

To investigate the role of renewable energy consumption in CO2 emissions across the globe, this
study employs a balanced panel data set for 120 countries covering 1995–2015 due to the actual
data availability. To fully address the concern about whether the role of renewable energy consump-
tion in CO2 emissions differs across countries with different income levels, the 120 countries are
DONG et al.   
| 1671

classified into four groups in accordance with their per capita gross national income (GNI) calcu-
lated using the World Bank Atlas method from 2016 (World Bank, 2017a): low-income countries
(LI subpanel, less than $1,005), lower-middle-income countries (LMI subpanel, $1,006–$3,955),
upper-middle-income countries (UMI subpanel, $3,956–$12,235) and high-income countries (HI
subpanel, more than $12,236). The LI subpanel in this study includes 12 countries, while the LMI,
UMI and HI subpanels comprise data for 29 countries, 37 countries and 42 countries, respectively
(see Table A1).
The variables in this study consist of per capita CO2 emissions (CO2, measured in metric tonnes);
per capita GDP (GDP, measured in constant 2010 US$); per capita renewable energy consumption
(RE, measured in kilogram [kg] oil equivalent); per capita non-renewable energy consumption (NRE,
measured in kg oil equivalent); economic structure, which is denoted as the ratio of the added value
by industry to GDP (ES, measured in %); urbanisation level, which is denoted as the proportion of
urban population in the total population (URB, measured in %); and trade openness, which is denoted
as the proportion of the total added value by import and export to GDP (TO, measured in %). The data
on the variables are mainly sourced from the World Development Indicators (WDI) published by the
World Bank (2017b). However, the data on some variables for the selected countries for the selected
years are missing in the WDI; therefore, this study fills them in using data from the CO2 Emissions
from Fuel Combustion (IEA, 2017a) and World Energy Statistics (IEA, 2017b) published by the IEA.
In addition, the scatter plot, distribution overlay and box chart of the variables for the four subpanels
and for the global panel are displayed in Figure 3.
The summary statistics of all the variables for the four subpanels and for the global panel are
provided in Table 1. According to the mean values of ln CO2, ln GDP and ln NRE, as the richest and
poorest regions, the HI subpanel and LI subpanel consume the maximum and minimum volume of
non-renewable energy, respectively. As the combustion of non-renewable energy contributes most of
the CO2 emissions (Dong, Sun, & Hochman, 2017), the HI subpanel is the biggest emitter of the four
subpanels, while the LI subpanel produces the lowest CO2 emissions level. With regard to the mean
values of ln URB and ln TO, the HI subpanel has the highest levels of urbanisation and trade openness,
while the levels of urbanisation and trade openness in the LI subpanel are the lowest. Table 1 also
indicates that the level of industrialisation in the LI subpanel is still the lowest; however, the UMI sub-
panel has the highest level of industrialisation. In addition, one interesting point is worth mentioning:
in the richest region (i.e., the HI subpanel), renewable energy consumption is highest; however, the
poorest region (i.e., the LI subpanel) does not consume the minimum volume of renewable energy.
Specifically, according to the mean value of ln RE, the renewable energy consumption in the UMI
subpanel is the lowest.

4 | E STIM AT IO N ST R AT E GY

Technically, the estimation procedure employed here mainly comprises six steps (see Figure 4): step
1 tests for cross-sectional dependence (Section 4.1); in step 2, the slope homogeneity tests are con-
ducted (Section 4.2); step 3 involves conducting two panel unit root tests under cross-sectional de-
pendence and heterogeneity (Section 4.3); this is followed by step 4, in which the Westerlund panel
cointegration test is utilised to test for the existence of a cointegration relationship among variables
(Section 4.4). To estimate the long-run parameters, three panel estimators allowing for cross-sectional
dependence and heterogeneity are employed in step 5 (Section 4.5) and, in step 6, the causality rela-
tionships flow is investigated (Section 4.6).
1672
|    DONG et al.

4 12
75% 75%
2 50%
25% 75%
75%
10 50%
75%

In GDP
50% 50% 25%
In CO2

25% 75% 75%

0 50% 25% 50% 50%

25% 75% 8 25%

75%
50% 25%
50%
–2 25%
25%
75%
50%
6 25%

–4
4
HI UMI LMI LI Global HI UMI LMI LI Global
160 12
10
120 75% 8
In (GDP)2

50%
75%
6 75%

In RE
25% 50% 75% 75%
75% 75% 50%
80 75% 25% 50%
25%
50%
25%
25% 50%
25%
50%
25%
50%
4
75%
50% 25%

40
25% 75%
50%
2
25%

0
0 –2
HI UMI LMI LI Global HI UMI LMI LI Global
12 5.0
10 4.5
8 75%
50%
25% 75%
75% 4.0
In NRE

50% 50%
In ES

75%
6
25% 75%
50% 25% 3.5 75% 50% 75% 75%
75%
75% 50% 50% 50%
25% 25%
4
50%
25%
3.0 25% 25% 50%
25%
25%

2 2.5
0 2.0
HI UMI LMI LI Global HI UMI LMI LI Global
5.0 7
4.5 75%
50% 75% 6
75%
25%
50% 50%
4.0 25% 75%
5
In URB

50% 25%
In TO

75% 75%
3.5 25% 50% 50%
75%
50%
75%
50% 75%
75%
50%
25%
4 25%
25% 25%
50%
25%
25%
3.0
2.5 3

2.0 2
HI UMI LMI LI Global HI UMI LMI LI Global

F I G U R E 3 Scatter plot, distribution overlay and box chart of the logarithms of the eight variables for the four
subpanels and global panel
Note: The dot denotes the minimum/maximum values, the horizontal bar in the box denotes the median values, and
the top and bottom edges of the box denote the 75th percentile and 25th percentile, respectively [Colour figure can be
viewed at wileyonlinelibrary.com]

4.1 | Cross-sectional dependence tests

Many scholars argue that cross-sectional dependence may exist within and across countries and
regional economies due to globalisation of the world economy (Bilgili, Koçak, Bulut, & Kuloğlu,
2017; De Hoyos & Sarafidis, 2006; Dong, Hochman, Zhang, et al., 2018; Shahbaz, Sarwar, et al.,
2017; Shahbaz, Shahzad, Mahalik, & Sadorsky, 2018). Furthermore, the results of panel unit root and
cointegration tests likely have substantial size distortions if cross-sectional dependence is ignored
(Atasoy, 2017; O'Connell, 1998). Therefore, to test for cross-sectional dependence, the Lagrange
DONG et al.   
| 1673

TABLE 1 Descriptive statistics of the variables (after logarithm)

Panel Statistics lnCO2 lnGDP LnRE LnNRE LnES LnURB lnTO

HI subpanel Mean 2.019 10.181 5.650 7.950 3.219 4.327 4.425
SD 0.528 0.690 1.699 0.560 0.254 0.169 0.590
Max. 3.212 11.626 9.538 9.133 4.201 4.605 6.090
Min. 0.086 8.474 −1.672 6.067 2.239 3.924 2.814
Obs. 882 882 882 882 882 882 882
UMI subpanel Mean 1.169 8.522 4.885 6.911 3.448 4.113 4.249
SD 0.716 0.499 1.415 0.751 0.331 0.243 0.608
Max. 2.750 9.635 7.886 8.516 4.440 4.503 5.395
Min. −0.713 6.765 −2.839 5.132 2.455 3.395 −3.863
Obs. 777 777 777 777 777 777 777
LMI subpanel Mean −0.153 7.313 5.171 5.593 3.279 3.732 4.251
SD 0.947 0.513 0.789 1.014 0.344 0.366 0.463
Max. 2.603 8.360 6.692 8.054 4.349 4.244 5.186
Min. −1.993 5.835 3.181 3.724 0.729 2.851 2.693
Obs. 609 609 609 609 609 609 609
LI subpanel Mean −1.538 6.358 5.307 4.208 3.120 3.385 4.119
SD 1.001 0.481 1.319 0.997 0.398 0.348 0.386
Max. 0.290 7.206 6.474 5.902 4.074 3.959 5.297
Min. −4.058 5.139 0.993 1.594 2.229 2.387 2.966
Obs. 252 252 252 252 252 252 252
Global panel Mean 0.877 8.594 5.264 6.686 3.294 4.023 4.298
SD 1.376 1.453 1.431 1.452 0.336 0.411 0.559
Max. 3.212 11.626 9.538 9.133 4.440 4.605 6.090
Min. −4.058 5.139 −2.839 1.594 0.729 2.387 −3.863
Obs. 2,520 2,520 2,520 2,520 2,520 2,520 2,520
Note: SD, Max., Min. and Obs. denote standard deviation, maximum, minimum and observations, respectively.

multiplier (LM) cross-sectional dependence test is proposed by Breusch and Pagan (1980). The panel
data model for the Breusch–Pagan LM test are as follows:

yit = 𝛼i + 𝛽i xit + 𝜇it , (4)

where subscripts i = 1,2, … ,N and t = 1,2, … ,T indicate the cross-sectional dimension and time dimen-
sion, respectively; xit denotes a k × 1 vector of explanatory variables; and 𝛼i and 𝛽i represent individual
intercepts and slope coefficients across countries, respectively. Accordingly, the Breusch–Pagan LM test
statistic can be calculated as follows:

∑∑
N−1
N
N (N − 1)
LMBreusch − Pagan = Tij 𝜌̂2ij → 𝜒 2 , (5)
i=1 j=i+1
2

where 𝜌̂ij refers to the coefficient of pairwise correlation obtained from individual ordinary least squares
(OLS) estimation in Equation (4). Furthermore, the null hypothesis of no cross-sectional dependence
1674
|    DONG et al.

Start

Cross-sectional
dependence and slope CD test; Pesaran and Yamagata test
homogeneity tests

Steps 1&2
Not reject the Reject the null
null hypothesis hypothesis

Traditional Unit root

econometric CADF; CIPS
test
methods
Step 3
Stationary Non-stationary

Westerlund cointegration test Cointegration

Termination
test
Step 4
Not cointegrated Cointegrated

Test for long-run

Termination
relationship
Step 5 Step 6
Steps 5&6
MG D-H panel
AMG causality test
CCEMG

End

FIGURE 4 Estimation procedure of this study [Colour figure can be viewed at wileyonlinelibrary.com]

( )
(H0 :Cov 𝜇it ,𝜇jt = 0 for all t and i ≠ j) in the Breusch–Pagan
( ) LM test is tested against the alternative hy-
pothesis of cross-sectional dependence (H1 :Cov 𝜇it ,𝜇jt ≠ 0 for at least one pair of i ≠ j).
Pesaran, Ullah, and Yamagata (2008) indicate that the Breusch–Pagan LM test is not appropriate
when N is large, which will lose its power if the population average pairwise correlation mean is
close to zero. To overcome this issue, Pesaran et al. (2008) propose a bias-adjusted version of the
Breusch–Pagan LM test by using accurate mean and variance of the Breusch–Pagan LM test statistics.
Accordingly, the bias-adjusted LM test (i.e., Pesaran LM test) statistic can be calculated as follows:
√( ) N−1 N
2 ∑ ∑ (T − k) 𝜌̂2ij − 𝜇Tij
LMPesaran et al. = 𝜌̂ √ → N (0,1) , (6)
N (N − 1) i=1 j=i+1 ij 2
𝜈Tij
DONG et al.   
| 1675

where k indicates the number of regressors and 𝜇Tij and 𝜈Tij

2
denote the exact mean and variance of

(T − k) 𝜌̂2ij, respectively.

4.2 | Slope homogeneity tests

As Shahbaz et al. (2018) indicate, each country's dynamic of the economic development process may
be similar due to the existence of strong cross-sectional dependence. Therefore, to test the slope ho-
mogeneity, Swamy (1970) proposes a homoscedasticity assumption framework for the panels where
N is fixed relative to T. Therefore, for large panels where N → ∞ and T → ∞, Pesaran and Yamagata
(2008) extend the Swamy test, which is modelled as follows:

∑
N
( )� xi� M𝜏 xi ( )
S̃ = 𝛽̂i − 𝛽̃WFE 𝛽̂i − 𝛽̃WFE , (7)
i=1 𝜎̃ i2

where S̃ is the adjusted Swamy test (i.e., Pesaran and Yamagata slope homogeneity test) statistic, 𝛽̂i indi-
�∑ �−1 ∑
cates the pooled OLS coefficient, 𝛽̃WFE = N
i=1
(Xi
�
M 𝜏 Xi )∕𝜎̃ 2
i
N
i=1
(Xi� M𝜏 yi )∕𝜎̃ i2 denotes the

weighted fixed-effect pooled estimator, 𝜎̃ i2 = ((yi − Xi 𝛽̂i )� M𝜏 (yi − Xi 𝛽̂i ))∕(T − k − 1) represents the estimate
of 𝜎i2, xi refers to the matrix containing explanatory variables in deviations from the mean and M𝜏 denotes
the identity matrix. Furthermore, the null hypothesis of slope homogeneity (H0 :𝛽i = 𝛽j for all i) in the
Pesaran and Yamagata slope homogeneity test is tested against the alternative hypothesis of slope hetero-
geneity (H1 :𝛽i ≠ 𝛽j for all i). The standard dispersion statistic can be defined as follows:

� �
√ N −1 S̃ − k
̃=
Δ N √ . (8)
2k

The bias-adjusted version of the Δ

̃ test can be modelled as follows:

⎛ � �⎞
√ ⎜ N −1 S − E z̃iT ⎟
̃ adj = N⎜ � (9)
Δ � � ⎟,
⎜ Var z̃iT ⎟
⎝ ⎠

( ) ( )
where E z̃iT = k and Var z̃iT = (2k(T − k − 1))∕(T + 1) indicate the mean and variance, respectively.

4.3 | Panel CADF and CIPS unit root tests

As Paramati, Shahbaz, and Alam (2017) report, traditional panel unit root tests, such as augmented
Dickey–Fuller (ADF), are not appropriate when the series has cross-sectional dependence and hetero-
geneity. To overcome this issue, by extending the standard ADF regressions with the cross-sectional
averages of the lagged levels and first differences of the individual series, Pesaran (2007) produces a
1676
|    DONG et al.

new panel unit root test allowing for cross-sectional dependence and heterogeneity, that is the cross-
sectional ADF (CADF) panel unit root test. The CADF regression is as follows:

Δyit = ai + bi yi,t−1 + ci yt−1 + di Δyt + eit , (10)

where subscripts i = 1,2, … ,N and t = 1,2, … ,T indicate the cross-sectional dimension and time
∑
dimension, respectively; yt−1 = N −1 Ni=1 yi,t−1 denotes the cross-sectional mean of yi,t−1; and
∑
Δyt = N −1 i=1 Δyit represents the first differences of Δyit. Furthermore, the null hypothesis of a unit
N

root (H0 :𝛽i = 0 for all i) in the CADF test is tested against the alternative hypothesis of no unit root
(H1 : 𝛽i < 0 for some i).
Based on the average of individual CADF tests, Pesaran (2007) also develops the cross-sectional
augmented Im, Pesaran and Shin (CIPS) panel unit root test for the whole panel. The CIPS test statistic
can be calculated as follows:

∑
N
CIPS = N −1
CADFi , (11)
i=1

where CADFi indicates the CADF test statistic for the ith cross-sectional unit in Equation (10).

4.4 | Westerlund panel cointegration test

Paramati, Shahbaz, et al. (2017) argue that traditional panel cointegration tests, such as the Pedroni
panel cointegration test developed by Pedroni (2001), have not considered cross-sectional dependence
and slope heterogeneity in estimating long-run cointegration relationships among the variables. To
address this shortcoming, based on structural dynamics rather than residuals dynamics, Westerlund
(2005) develops four error correction-based panel cointegration tests (i.e., two group mean statistics
and two panel statistics). The error correction model in the Westerlund panel cointegration test is as
follows:

( ) ∑m
∑
m
Δzit = 𝛿i� di + 𝜃i zi,t−1 + 𝜋i� yi,t−1 + 𝜃ij Δzi,i−j + 𝜑ij Δyi,i−j + 𝜔it , (12)
j=1 j=0

where 𝜃i indicates the adjustment term. According to the least squares estimates of 𝜃i and its t-ratio for the
ith cross-sectional unit, the two group mean statistics in the Westerlund panel cointegration test can be
calculated as follows:

∑
N
𝜃i
G𝜏 = N −1 ( ), (13)
i=1 SE 𝜃̂i

∑N
T𝜃i
G𝛼 = N −1
�
, (14)
𝜃
i=1 i
(1)

where the null hypothesis of no cointegration (H0 :𝜃i = 0 for all i) in these two group mean sta-
tistics is tested against the alternative hypothesis of cointegration (H1 :𝜃i < 0 for at least one i).
DONG et al.   
| 1677

Furthermore, the other two panel statistics in the Westerlund panel cointegration test can be cal-
culated as follows:

𝜃̂
P𝜏 = ( ), (15)
SE 𝜃̂

̂
P𝛼 = T 𝜃, (16)

where the null hypothesis of no cointegration (H0 :𝜃i = 0 for all i) in these two panel statistics is tested
against the alternative hypothesis of cointegration (H1 :𝜃i < 0 for all i).

4.5 | Estimation of panel regression

4.5.1 | Mean group estimator

As Pesaran and Smith (1995) report, traditional estimation methods such as fixed effects (FE), random
effects (RE), fully modified OLS (FMOLS) and dynamic OLS (DOLS) do not take slope heterogene-
ity into account and, thus, result in inconsistent estimates. To overcome this issue, Pesaran and Smith
(1995) develop the mean group (MG) estimator, which allows intercepts, slopes and error variances
to differ across groups (Atasoy, 2017). However, Eberhardt (2012) points out that the MG estimator
does not take cross-sectional dependence into account. Therefore, this study uses only the MG estima-
tion results to compare with other estimators.

4.5.2 | Common correlated effects mean group estimator

In addition to the MG estimator, this study also utilises two recently introduced panel estimators
that allow for cross-sectional dependence and heterogeneity. The first new estimator used in this
study is the common correlated effects mean group (CCEMG) estimator, first introduced by Pesaran
(2006) and advanced by Kapetanios, Pesaran, and Yamagata (2011). This estimator can take cross-
sectional dependence and slope heterogeneity into account. The CCEMG estimator can be modelled
as follows:

yit = ai + 𝛽i xit + ci ft + 𝛼i yit + 𝜃i xit + eit , (17)

where yit and xit denote a vector of observable dependent variables and independent variables, respec-
tively; 𝛽i represents the country-specific estimates of coefficients; ft refers to the unobserved common fac-
tor with the heterogeneous factor; and ai and eit are the intercept and error term, respectively. Accordingly,
the CCEMG estimator statistics can be calculated by the mean of each coefficient for each individual
regression, as follows:

∑
N
b̂ CCEMG = N −1 𝛽̂i , (18)
i=1

where 𝛽̂i can be obtained by the estimates of coefficients in Equation (17).

1678
|    DONG et al.

4.5.3 | Augmented mean group estimator

The second new estimator used here is the augmented mean group (AMG) estimator, introduced by
Eberhardt and Bond (2009). Similar to the CCEMG estimator, the AMG estimator can account for
cross-sectional dependence and slope heterogeneity. The AMG estimator can be modelled by the fol-
lowing two stages:

∑
T
AMG−−Stage 1 Δyit = ai + 𝛽i Δxit + ci ft + di Dt + eit ,
(19)
t=2

∑
N
−1
AMG−−Stage 2 b̂ AMG = N 𝛽̂i ,
i=1

where Δ indicates the first difference operator, di depicts the coefficient of the time dummies and is
referred to as the common dynamic process and b̂ AMG exhibits the mean group estimator for the AMG
estimator, and the other parameters in Equation (19) are similar to those of Equation (17).

4.6 | Dumitrescu–Hurlin panel causality test

As Dong, Sun, and Dong (2018), report, identifying the directionality of the causality between CO2
emission and its determinants is particularly helpful in developing specific policies for tackling CO2
emissions. Considering that cross-sectional dependence and heterogeneity may exist in the series,
Dumitrescu and Hurlin (2012) develop the Dumitrescu–Hurlin (D–H) panel causality test based on
the Granger (1969) non-causality test. The linear model of the D-H panel causality test is as follows:

∑
K
∑
K
yit = ai + 𝛾i(k) yi.t−k + 𝛽i(k) xi,t−k + 𝜀it , (20)
k=1 k=1

where subscripts i = 1,2, … ,N and t = 1,2, … ,T indicate the cross-sectional dimension and time dimen-
( )�
sion, respectively; 𝛼i and 𝛽i = 𝛽i(1) ,𝛽i(2) , … ,𝛽i(m) , respectively, represent individual intercepts and coef-

ficients, which are fixed in the time dimension; and 𝛾i(k) and 𝛽i(k), respectively, denote autoregressive
parameters and regression coefficient estimates, which are supposed to vary across countries. Moreover,
the null hypothesis of no causal relationship (H0 :𝛽i = 0 for all i) in the D-H panel causality test is tested
against the alternative hypothesis of a causal relationship
(H1 :𝛽i = 0 for i = 1,2, … ,N1 and 𝛽i ≠ 0 for i = N1 + 1,N1 + 2, … N ). Accordingly, the average statistic (i.e.,
HNC
WN,T ) under the null hypothesis in the D-H panel causality test can be calculated as follows:

∑
N
HNC
WN,T = N −1 Wi,T , (21)
i=1
[ ( )−1 � ]
where Wi,T = 𝜃̂i� R� 𝜎̂ i2 R Zi� Zi R R𝜃̂i indicates the individual Wald statistic for the ith cross-sectional

unit. Furthermore, the standardised test statistic (i.e., ZN,T

HNC
) for N → ∞ and T → ∞ can be calculated as
follows:
DONG et al.   
| 1679

√ ( )
HNC N HNC (22)
ZN,T = WN,T − M → N (0,1) .
2M

5 | E M P IR ICA L R E SU LTS

5.1 | Results of cross-sectional dependence and slope homogeneity tests

Table 2 shows the results of the Breusch–Pagan LM and Pesaran bias-adjusted LM cross-sectional
dependence tests. For the global panel and four subpanels, the null hypothesis of no cross-sectional
independence is rejected at the 1% level. This output implies that the data in the global panel and
four subpanels are cross-sectionally dependent. Table 2 also presents the results of the Pesaran and
Yamagata slope homogeneity test, supporting country-specific heterogeneity for the global panel and
four subpanels as the null hypothesis of slope homogeneity is rejected. The above findings indicate
that the econometric techniques used in the following steps should be robust to cross-sectional de-
pendence and slope heterogeneity.

5.2 | Results of panel unit root test

The presence of cross-sectional dependence and slope heterogeneity directs us to use the second-
generation panel unit root tests to examine the stationarity properties of the variables. The results of
CADF and CIPS panel unit root tests are reported in Table 3. For the global panel and four subpanels,
not all variables are stationary in terms of the intercept and trend, but all the series are stationary at
first difference at the 1% significance level. This implies that all the variables in the global panel and
four subpanels are integrated at I (1).

5.3 | Results of panel cointegration test

The unique order of integration of the variables allows us to examine the long-run relationships
among the variables by using the panel cointegration tests developed by Westerlund (2005); the re-
sults of the four Westerlund test statistics are reported in Table 4. We note that the null hypothesis of
no cointegration can be rejected by one group and two panel statistics, confirming the existence of

TABLE 2 Results of cross-sectional dependence and slope homogeneity tests

Cross-sectional dependence test Slope homogeneity test

Panel Breusch–Pagan LM Pesaran LM 𝚫 𝚫adj

*** *** **
HI subpanel 9,655.709 210.924 1.699 1.878**
UMI subpanel 4,619.281*** 107.305*** 2.127** 2.352***
LMI subpanel 3,967.330*** 123.961*** 2.108** 2.331***
*** *** **
LI subpanel 122.115 3.840 1.816 2.129**
Global panel 49,086.570*** 350.016*** 4.353*** 4.812***
Notes: ***, ** and * denote rejection of the null hypothesis at the 1%, 5% and 10% levels, respectively; the null hypothesis of the
cross-sectional dependence and slope homogeneity tests is no cross-sectional dependence and slope homogeneity, respectively.
1680
|    DONG et al.

TABLE 3 Results of CADF and CIPS panel unit root tests

CADF test CIPS test

Variable Level 1st difference Level 1st difference

HI subpanel
ln CO2 −0.739 −13.148*** −2.406 −4.331***
***
ln GDP 5.115 −3.502 −1.846 −2.844***
ln GDP2 5.086 −3.419*** −1.889 −2.829***
*** *** ***
ln RE −2.513 −12.559 −2.984 −4.292***
ln NRE −0.742 −12.248*** −2.440 −4.043***
ln ES 2.771 −10.924*** −2.034 −3.992***
***
ln URB 13.657 −11.702 −0.733 −3.294***
ln TO 5.886 −5.349*** −1.595 −3.124***
UMI subpanel
ln CO2 −0.053 −10.647*** −2.452 −4.112***
ln GDP 4.136 −7.595*** −1.848 −3.551***
***
ln GDP 2
4.500 −7.320 −1.768 −3.507***
ln RE 2.207 −6.877*** −1.994 −3.424***
***
ln NRE 6.854 −3.695 −1.227 −2.994***
ln ES 0.168 −9.983*** −2.273 −3.948***
ln URB 5.815 −4.022*** −1.941 −3.497***
*** *
ln TO 0.632 −9.218 −2.623 −3.847***
LMI subpanel
ln CO2 −0.484 −12.277*** −2.489 −4.462***
ln GDP 1.934 −7.106*** −2.229 −3.631***
ln GDP2 1.899 −6.978*** −2.226 −3.601***
***
ln RE 5.070 −3.245 −1.521 −3.119***
ln NRE 2.528 −6.642*** −2.315 −3.597***
*** *** **
ln ES −2.516 −10.954 −2.744 −4.282***
ln URB 10.611 −2.830*** −1.301 −3.076***
ln TO −1.883** −11.453*** −2.528 −4.438***
LI subpanel
ln CO2 0.807 −5.367*** −2.103 −3.919***
** *** **
ln GDP −1.804 −5.029 −2.804 −3.798***
ln GDP2 −1.768** −5.092*** −2.795** −3.806***
***
ln RE 3.421 −3.089 −1.767 −4.641***
ln NRE 0.183 −3.625*** −2.768** −3.609***
ln ES −1.505* −8.892*** −2.724** −4.864***
***
ln URB −1.084 −2.846 −2.357 −3.282***
ln TO −1.033 −8.230*** −2.597 −4.656***
Global panel

(Continues)
DONG et al.   
| 1681

TABLE 3 (Continued)

CADF test CIPS test

Variable Level 1st difference Level 1st difference

***
ln CO2 0.864 −22.334 −2.308 −4.419***
ln GDP 7.046 −10.044*** −1.954 −3.214***
***
ln GDP 2
7.562 −9.752 −1.928 −3.198***
ln RE 4.267 −14.222*** −2.006 −3.667***
***
ln NRE 7.390 −14.958 −1.670 −3.606***
ln ES −0.218 −19.624*** −2.361 −4.063***
ln URB 11.946 −3.857*** −1.073 −2.856***
***
ln TO 3.147 −16.056 −2.251 −3.770***
Notes: ***, ** and * illustrate statistical significance at the 1%, 5% and 10% levels, respectively; the CADF and CIPS tests are esti-
mated using intercept and trend variables and Z(t-bar) statistics, and the null hypothesis is unit root.

cointegration between the variables for the global panel and four subpanels. The presence of cointe-
gration between the variables in the global panel and four subpanels serves the basic purpose of this
study, that is exploring whether the role of renewable energy consumption in CO2 emissions differs
across countries with different income levels.

5.4 | Results of long-run parameters

5.4.1 | Estimates for global panel

To investigate the long-run linkages between the variables for the global panel, three new estima-
tion techniques are utilised in this study (i.e., MG, CCEMG and AMG estimators). The estima-
tion results for the global panel are listed in Table 5. As Dong et al. (2017) and Ma (2015) report,
the root mean square error (RMSE) is a traditional and effective tool in observing the goodness
of fit for each estimator. As shown in Table 5, the RMSE value of the MG estimator is slightly
larger than the levels seen in other estimators. However, as noted previously (see Section 4.5.1),
although the MG estimator does take slope heterogeneity into account, it does not address the
residual cross-sectional dependence. With respect to other estimators (i.e., CCEMG and AMG

TABLE 4 Results of Westerlund panel cointegration test

Test

Panel G𝝉 G𝜶 P𝝉 P𝜶
*** ***
HI subpanel −3.559 1.535 −3.045 −1.540*
UMI subpanel −3.151*** 0.722 −2.133*** −1.641*
LMI subpanel −1.505* 2.474 −2.054** −1.309*
** ***
LI subpanel −2.157 −0.541 −3.055 −2.084**
Global panel −3.429*** −0.248 −3.613*** −6.323***
Note: ***, ** and * represent statistical significance at the 1%, 5% and 10% levels, respectively; the Westerlund test is estimated
using constant, 1 lag and Zbar-statistics, and the null hypothesis is no cointegration.
1682
|    DONG et al.

TABLE 5 MG, CCEMG and AMG estimation results for the global panel

Dependent variable: ln CO2

Variables MG CCEMG AMG

*
ln GDP 1.948 1.893 1.859*
(1.80) (1.37) (1.84)
ln GDP2 −0.123* −0.120 −0.096*
(−1.84) (−1.42) (−1.91)
ln RE −0.102 −0.054 −0.038
(−1.27) (−0.85) (−0.73)
*** ***
ln NRE 0.684 0.785 0.738***
(17.07) (15.45) (19.10)
*** ***
ln ES 0.124 0.176 0.073*
(2.76) (3.11) (1.87)
**
ln URB 1.505 0.797 0.727**
(2.34) (0.27) (2.40)
ln TO 0.044 0.001 0.032***
(1.34) (0.03) (4.02)
Constant −11.288*** −25.071*** −14.153***
(−4.38) (−3.21) (−4.79)
RMSE 0.057 0.033 0.051
EKC hypothesis Yes No Yes
Observations 2,520 2,520 2,520
Countries 120 120 120
Note: ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively; the values in parentheses represent t-statistics,
and the root mean square error (RMSE) indicates the residual size of each model.

estimators, which are robust to cross-sectional dependence and slope heterogeneity), the RMSE
value of the AMG estimator is slightly larger than that of the CCEMG estimator. Also, in addition
to renewable energy, the parameter estimates of other variables obtained from the AMG estima-
tor are significant. Consequently, in this study, the AMG estimator is utilised as the benchmark
estimation method.
According to the results of the AMG estimator shown in Table 5, the estimated coefficient of
ln GDP is positive while (ln GDP)2 carries a negative sign, suggesting that the EKC hypothesis is
valid for the global panel. This also implies that for the global panel, CO2 emissions increase with
economic growth at the initial phase and then decrease after reaching a peak. This finding is consistent
with Balado-Naves, Baños-Pino, and Mayor (2018), Shuai et al. (2017) and You and Lv (2018), who
detect strong evidence for the EKC relationship between CO2 emissions and economic growth across
the globe.
Furthermore, the estimated coefficients of ln NRE, ln ES, ln URB and ln TO indicate that the global
CO2 emissions are significantly and positively affected by non-renewable energy consumption, eco-
nomic structure, urbanisation level and trade openness in the long run. Specifically, in the long run,
a 1% increase in ln NRE, ln ES, ln URB and ln TO rises to 0.738%, 0.073%, 0.727% and 0.032% of
ln CO2 for the global panel. With respect to the estimated coefficient of ln RE, it is noteworthy that
although renewable energy consumption has a negative effect on CO2 emissions for the global panel,
DONG et al.   
| 1683

this effect is not significant. This may be because the mitigation effect of renewable energy consump-
tion on CO2 emissions is obscured by higher economic growth and increasing non-renewable energy
consumption. In fact, according to statistics from BP, the per capita renewable energy consumption in
the world only accounted for about 0.17 tonnes oil equivalent (toe) in 2015, or approximately 9.5% of
the global total energy needs. This finding coincides with Balsalobre-Lorente et al. (2018), Chiu and
Chang (2009), Dong, Sun, Jiang, and Zeng (2018), and Sugiawan and Managi (2016), who point out
that the current level of renewable energy consumption is still not considerably exploited to contribute
to CO2 emissions mitigation across the globe. In other words, renewable energy consumption can
make a noteworthy contribution to reducing global CO2 emissions only when its consumption exceeds
a certain share of total energy needs.

5.4.2 | Estimates for various subpanels with different income levels

By employing the AMG estimator, the estimated results for the four subpanels (i.e., HI, UMI, LMI
and LI subpanels) are reported in Table 6. From this table, only for the HI and UMI subpanels are the
estimated coefficients of ln GDP and (ln GDP)2 positive and negative, respectively, indicating that the
EKC hypothesis is valid only in the HI and UMI subpanels. Conversely, the EKC hypothesis for CO2

TABLE 6 AMG estimation results for the four subpanels

Dependent variable: ln CO2

Variables HI UMI LMI LI

** **
ln GDP 0.612 0.542 0.473 1.116*
(2.12) (2.16) (1.01) (1.76)
ln GDP2 −0.029** −0.029** 0.037 0.132**
(−2.15) (−2.62) (1.55) (2.55)
ln RE −0.042*** −0.045 −0.001 −0.004
(−5.35) (−0.99) (−0.04) (−0.17)
ln NRE 0.739*** 0.633*** 0.893*** 0.678***
(28.32) (27.13) (51.84) (23.15)
ln ES 0.144*** 0.103*** 0.294*** 0.144***
(4.28) (3.07) (9.03) (3.01)
** ** ***
ln URB 0.027 0.040 0.069 0.094**
(2.38) (2.02) (3.61) (2.32)
** ***
ln TO −0.001 0.019 0.088 0.285***
(−0.051) (1.99) (3.73) (6.85)
*** *** **
Constant −7.020 −6.886 −4.109 −3.051
(−4.95) (−5.560) (−2.46) (−1.62)
RMSE 0.033 0.038 0.064 0.062
EKC hypothesis Yes Yes No No
Observations 882 777 609 252
Countries 42 37 29 12
Note: ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively; the values in parentheses represent t-statistics,
and RMSE indicates the residual size of each model.
1684
|    DONG et al.

emissions does not exist in the LMI and LI subpanels. One possible reason is that for the LMI and LI
subpanels, the EKC for CO2 emissions may not appear in the near future as their current levels of CO2
emissions are very small. Specifically, as shown in Figure 3 and Table 1, the average CO2 emissions
in the LMI and LI subpanels are considerably lower than those in the HI and UMI subpanels. Another
potential reason is that for the LMI and LI subpanels, the huge gap between the current economic level
($4,218.1 for LMI and $698.9 for LI in 2015, respectively; see World Bank (2017b)) and the possible
turning point of EKC means that the peak of CO2 emissions may not be reached in the near future
and, thus, the EKC hypothesis for CO2 emissions does not exist in these two subpanels. This finding
is consistent with the work of Dong, Hochman, and Timilsina (2018), who also conclude that only for
HI and UMI countries does the EKC hypothesis exist.
With regard to the variables ln NRE, ln ES and ln URB, the AMG estimator provides similar results
for the four subpanels, implying that the coefficients of the four variables are positive and strongly
significant. In other words, for the HI, UMI, LMI and LI subpanels, non-renewable energy consump-
tion, economic structure and urbanisation level have positive and significant effects on CO2 emissions
in the long run. In contrast, the AMG estimator provides mixed results on the estimated coefficient
of ln TO across the four subpanels. More specifically, in the long run, trade openness has a positive
and significant effect on CO2 emissions in the UMI, LMI and LI subpanels, whereas the relationship
between trade openness and CO2 emissions in the HI subpanel is negative and not significant. This
implies that the effect of trade openness and CO2 emissions depends on the income level in the four
subpanels. In other words, CO2 emissions increase with a growing level of trade openness at the initial
phase and then decrease after reaching a certain threshold level of trade openness. This finding is also
supported by the work of Shahbaz, Nasreen, et al. (2017).
With regard to the estimated coefficient for ln RE, the AMG estimator also provides mixed results.
Specifically, although renewable energy consumption has a negative effect on CO2 emissions in all
four subpanels, this effect is negative and statistically significant only in the HI subpanel (see Table
6). This finding again suggests that the mitigation effect of renewable energy consumption on CO2
emissions may be obscured in the regions in which the current level of renewable energy consumption
is still low, such as the UMI, LMI and LI subpanels. In other words, renewable energy consumption
can make a noteworthy contribution to reducing CO2 emissions only when its consumption exceeds
a certain share of total energy needs, such as in the HI subpanel. In fact, as indicated in Figure 3 and
Table 1, the renewable energy consumption in the HI subpanel is considerably higher than the levels
seen in other subpanels. For example, as an HI country, Sweden's proportion of renewable energy in
total energy needs in 2015 is approximately 43.8%, which is considerably higher than the levels seen
in most of the UMI countries (e.g., approximately 10.5% in China), LMI countries (e.g., approxi-
mately 6.3% in India) and LI countries (e.g., approximately 2.3% in Yemen; World Bank, 2017b). The
differences in the effect of renewable energy consumption on CO2 emissions across the four subpanels
are further discussed in Section 6.2.

5.5 | Results of panel causality test

To identify the directionality of the causality among the variables, the D–H panel causality test is uti-
lised in this study; the results are reported in Table 7. To further explore the dynamic causal linkages
among economic growth, renewable energy consumption and CO2 emissions, only the directionality
of the causality among the three variables is discussed in this section.
From Table 7, bidirectional causality is found between CO2 emissions and renewable energy con-
sumption for the global panel as well as for all four subpanels. This implies that renewable energy
DONG et al.   
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consumption causes CO2 emissions and, as a result, CO2 emissions cause renewable energy consump-
tion (i.e., the feedback effect). This finding also confirms the significant role of renewable energy
consumption in CO2 emissions in the long run. The empirical evidence is consistent with Apergis
and Payne (2014), Danish et al. (2017), Dogan and Seker (2016a) and Jebli et al. (2016), who also
find that CO2 emissions and renewable energy consumption have a confirmed bidirectional causality
relationship.
Furthermore, the feedback effect is noted between CO2 emissions and economic growth for the
global panel as well as for three of the four subpanels (i.e., the HI, UMI and LMI subpanels). This
implies that CO2 emissions and economic growth are interdependent, which is also supported by the
works of Acheampong (2018), Mirza and Kanwal (2017) and Omri (2013). In contrast, in the LI sub-
panel, economic growth causes CO2 emissions but not vice versa. This suggests that economic growth
is the key driving force behind the increase in CO2 emissions for the LI subpanel (i.e., the growth-led
emission hypothesis). The unidirectional causality from economic growth to CO2 emissions is similar
to that of Dong et al. (2017) and Sugiawan and Managi (2016).
In addition, bidirectional causality characterises the relationship between economic growth and re-
newable energy consumption for the global panel and two subpanels (i.e., the HI and UMI subpanels).
This feedback effect indicates that to maintain economic growth in the long run, the implementation
of renewable energy-exploring policies is an effective pathway. The empirical evidence of the bidirec-
tional causal association between economic growth and renewable energy consumption is consistent
with Apergis and Payne (2014), Jebli et al. (2016), Lin and Moubarak (2014), Moutinho and Robaina
(2016) and Saidi and Mbarek (2016). Conversely, in the LMI and LI subpanels, renewable energy con-
sumption causes economic growth but not vice versa, revealing the importance of a consistent renew-
able energy supply for economic growth for these two subpanels in the long run. This empirical finding
is similar to the findings of Acheampong (2018), Bhattacharya et al. (2017) and Zeb et al. (2014).
From the above findings, we note that the directionality of causality among the variables across
the global panel and four subpanels is mixed. This outcome is supported by Wang, Li, and Fang
(2018), who also provide evidence of varied causal linkages between the variables across various
income-based subpanels.

6 | F U RTH E R D ISC U S S ION

6.1 | The turning point and turning year of the EKC across the global panel
and various subpanels

According to Dong, Sun, Li, & Liao (2018), the turning point (TP) indicates the income level at which
the EKC will reach its peak, while the turning year (TY) denotes the year in which the EKC will reach
its peak. If the EKC holds, identifying its TP and TY is particularly useful for global and regional
policymakers in devising effective policies to promote reaching the EKC's TP and mitigating CO2
emissions. By referring to the works of Dong et al. (2017), Dong, Sun, Jiang, et al. (2018), and Dong,
Sun, Li, et al. (2018), the TP and TY of the EKC for the global panel and various subpanels can be
calculated as follows:

(23)
𝛽
− 2𝛽1
TP = e 2 ,
𝛽1 ∕2𝛽2 + ln GDP2015
TY = 2015 − ,
ln (1 + r) (24)
1686
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TABLE 7 Results of D–H panel causality test

Null hypothesis HI UMI LMI LI Global panel

*** *** ***
ln CO2 ⇏ ln GDP 3.704 12.424 6.765 0.481 12.567***
ln CO2 ⇏ ln RE 6.459*** 5.134*** 2.518*** 5.606*** 9.683***
ln CO2 ⇏ ln NRE 6.289*** 2.167** 3.448*** 9.876*** 9.743***
*** *** ***
ln CO2 ⇏ ln ES 3.953 8.415 7.296 −0.921 10.307***
ln CO2 ⇏ ln URB 18.023*** 31.840*** 45.670*** 22.291*** 14.549***
*** *** *** ***
ln CO2 ⇏ ln TO 6.877 6.256 4.995 3.835 11.211***
ln GDP ⇏ ln CO2 13.075*** 14.021*** 9.406*** 8.380*** 22.794***
*** ***
ln GDP ⇏ ln RE 9.686 6.829 0.669 0.558 17.157***
ln GDP ⇏ ln NRE 13.656*** 4.975*** 11.757*** 4.531*** 18.054***
ln GDP ⇏ ln ES 11.392*** 14.032*** 12.872*** 1.492 21.331***
*** *** *** ***
ln GDP ⇏ ln URB 58.055 73.576 55.501 54.811 72.981***
ln GDP ⇏ ln TO 6.861*** 7.190*** 11.829*** 8.431*** 16.533***
*** *** *** ***
ln RE ⇏ ln CO2 21.962 4.492 5.957 10.475 21.727***
ln RE ⇏ ln GDP 5.302*** 8.443*** 3.641*** 5.358*** 11.309***
ln RE ⇏ ln NRE 16.716*** 4.105*** 12.172*** 0.702*** 18.374***
*** *** *** ***
ln RE ⇏ ln ES 8.156 6.622 8.711 2.213 13.484***
ln RE ⇏ ln URB 0.771 21.271*** 32.319*** 8.945*** 7.108***
*** *** *** ***
ln RE ⇏ ln TO 7.698 5.018 6.477 2.593 11.345***
ln NRE ⇏ ln CO2 10.562*** 7.100*** 3.482*** 3.557*** 13.028***
ln NRE ⇏ ln GDP 2.954*** 9.535*** 6.687*** 6.954*** 12.529***
*** *** *** ***
ln NRE ⇏ ln RE 8.727 5.601 2.657 4.675 11.057***
ln NRE ⇏ ln ES 5.958*** 14.376*** 6.893*** 1.221 15.282***
*** *** *** ***
ln NRE ⇏ ln URB 29.688 35.499 24.226 30.486 19.692***
ln NRE ⇏ ln TO 4.654*** 6.315*** 4.796*** 3.226*** 9.638***
ln ES ⇏ ln CO2 9.933*** 4.475*** 3.472*** 4.188*** 11.392***
*** *** *** ***
ln ES ⇏ ln GDP 7.746 13.674 5.365 7.716 17.253***
ln ES ⇏ ln RE 9.311*** 0.191 3.810*** 6.317*** 11.151***
*** *** ***
ln ES ⇏ ln NRE 9.389 5.152 5.935 0.587 11.518***
ln ES ⇏ ln URB 0.586 0.613 0.350 0.108 0.779
*** *** *** ***
ln ES ⇏ ln TO 11.598 8.119 6.078 3.109 15.314***
*** *** *** ***
ln URB ⇏ ln CO2 6.887 8.460 8.487 8.431 16.512***
ln URB ⇏ ln GDP 3.684*** 23.058*** 13.895*** 24.441*** 3.392***
*** *** ***
ln URB ⇏ ln RE 6.791 7.707 8.692 0.119 7.168***
ln URB ⇏ ln NRE 3.814*** 3.883*** 14.041*** 8.650*** 4.782***
ln URB ⇏ ln ES 0.642 12.820*** 12.826*** 8.357*** 0.854
*** *** *** ***
ln URB ⇏ ln TO 7.213 5.733 7.547 8.784 9.144***
ln TO ⇏ ln CO2 14.601*** 4.925*** 4.864*** 5.047*** 15.361***
*** *** *** ***
ln TO ⇏ ln GDP 4.551 16.702 5.886 6.885 17.037***

(Continues)
DONG et al.   
| 1687

TABLE 7 (Continued)

Null hypothesis HI UMI LMI LI Global panel

*** ***
ln TO ⇏ ln RE 1.398 1.322 6.240 2.770 6.079***
ln TO ⇏ ln NRE 13.115*** 3.143*** 5.421*** 0.993 12.483***
*** *** ***
ln TO ⇏ ln ES 4.756 10.170 7.662 0.165 12.280***
ln TO ⇏ ln URB 33.643*** 40.243*** 31.112*** 7.726*** 25.936***
Notes: ***, ** and * represent the 1%, 5% and 10% level of significance, respectively. The D–H test is estimated using 1 lag and Zbar-
statistics, ln A ⇏ ln B suggests that ln A does not homogeneously cause ln B, and insignificant values are marked using boldface text.

where GDP2015 represents per capita GDP in 2015 for the global panel and various subpanels; r indicates
the average growth rate of GDP for the global panel and various subpanels covering 2010–15, which can
reflect the recent economic trends for the global panel and various subpanels; and 𝛽1 and 𝛽2 are the param-
eters to be estimated in Equation (3).
Accordingly, for the global panel, HI subpanel and UMI subpanel, the TP of the EKC for CO2
emissions is calculated as $16,031.2, $38,243.3 and $11,439.5, respectively. In addition to the HI
subpanel (per capita GDP in 2015 is approximately $40,434.4, which implies that the EKC in the HI
subpanel reached its TP before 2015), the TPs for the global panel and UMI subpanel are considerably
higher than their current economic levels (approximately $16,031.2 for the global panel and $7,668.8
for the UMI subpanel in 2015, respectively), suggesting that CO2 emissions for the global panel and
UMI subpanel will increase with economic growth and they should further develop a series of energy,
economic and environmental policies to promote reaching their turning points. Meanwhile, for the
global panel and UMI subpanel, the EKCs are expected to reach their peaks in approximately 2043
and 2025, respectively. This finding is similar to that of Shuai et al. (2017), who calculate that the CO2
emissions in the global panel and UMI subpanel will reach their TPs by approximately 2035 and 2021,
respectively, while the EKC in the HI subpanel has reached its peak.

6.2 | Does the role of renewable energy consumption in CO2 emissions differ
across countries with different income levels? Influencing paths across various
income-based subpanels

To further investigate whether the role of renewable energy consumption in CO2 emissions differs
across various income-based subpanels, based on the results of Table 7, the causality movements for
the four income-based subpanels are drawn in Figure 5. From this figure, we can note that the total
influencing paths (including direct and indirect influencing paths) between renewable energy con-
sumption and CO2 emissions vary across the income-based subpanels (i.e., the HI, UMI, LMI and LI
subpanels). Specifically, although the four subpanels have a similar direct path between renewable
energy consumption and CO2 emissions (i.e., bidirectional causality is found between these two vari-
ables for all the four subpanels), the indirect paths differ. For example, only for the UMI and LMI
subpanels can the renewable energy consumption indirectly affect CO2 emissions by directly affecting
the urbanisation level (see the red arrows in Figure 5). Moreover, in addition to the UMI subpanel, the
renewable energy consumption in other subpanels (i.e., the HI, LMI and LI subpanels) can directly
affect economic structure and, thus, indirectly influence CO2 emissions. These findings support the
basic hypothesis of this study; that is, for various income-based subpanels, significant differences
exist in the role of renewable energy consumption in CO2 emissions, especially highlighting in vari-
ous direct and indirect influencing paths between renewable energy consumption and CO2 emissions.
1688
|    DONG et al.

(a) (b)

CO2 CO2

TO GDP TO GDP

URB RE URB RE

ES NRE ES NRE

(c) (d)

CO2 CO2

TO GDP TO GDP

A: HI subpanel
B: UMI subpanel
C: LMI subpanel
URB RE URB RE D: LI subpanel
Unidirectional causality
Bidirectional causality
Direct effect
Indirect effect
ES NRE ES NRE Differences in impact paths
among various subpanels

F I G U R E 5 Influencing paths between renewables and emissions across various subpanels [Colour figure can be
viewed at wileyonlinelibrary.com]

Accordingly, for the policymakers across the various income-based subpanels, the mixed results are
particularly useful in developing specific policies to reduce CO2 emissions by controlling the influ-
encing paths between renewable energy and CO2 emissions.

6.3 | Robustness analysis: global panel estimations for the pre- and post-
financial crisis periods

As Mi et al. (2017) report, the world economy was significantly influenced by the 2008 global finan-
cial crisis, and it has been marked by slow growth since that crisis. To test for robustness and explore
the effect of the global financial crisis, we split the full sample (1995–2015) into two subsamples: pre
(1995–2007) and post (2008–15) global financial crisis. The results are reported in Table 8. For the
global panel, the estimated results of both subsamples (1995–2007 and 2008–15) are consistent with
those of the full sample (1995–2015) as the signs of all the variables are similar, suggesting that the
estimated results mentioned above are robust. Interestingly, as shown in Table 8, in both the pre- and
post-financial crisis periods, the estimated coefficient of ln RE is negative. This implies that, regard-
less of whether the world economy is in recession, renewable energy consumption can mitigate CO2
emissions and, thus, promotion measures for renewable energy are needed. This finding coincides
with existing studies, such as Balsalobre-Lorente et al. (2018). In addition, another interesting point
DONG et al.   
| 1689

TABLE 8 AMG estimation results for the global panel in the pre- and post-financial crisis periods: pre (1995–
2007) and post (2008–15)

Dependent variable: ln CO2

Variables Pre (1995–2007) Post (2008–15)

***
ln GDP 0.982 0.770***
(9.51) (8.87)
ln GDP2 −0.049*** −0.038***
(−8.42) (−8.31)
ln RE −0.016 −0.119
(−0.91) (−0.71)
***
ln NRE 0.767 0.851***
(43.02) (58.79)
*
ln ES 0.082 0.112***
(1.71) (4.77)
***
ln URB 0.844 0.628***
(3.28) (3.84)
**
ln TO 0.019 0.256**
(2.16) (2.26)
Constant −8.630*** −8.265***
(−20.85) (−24.15)
RMSE 0.026 0.039
EKC hypothesis Yes Yes
Observations 2,520 2,520
Countries 120 120
Note: ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively; the values in parentheses represent t-statistics,
and RMSE indicates the residual size of each model.

is worth mentioning: as seen in Table 8, the absolute value of the estimated coefficients of ln RE in
the pre-financial crisis period (see the left part of Table 8) is considerably smaller than that of the
pre-financial crisis period (see the right segment of Table 8). This output implies that over time, along
with the rising economic growth and share of renewable energy consumption, the mitigation effect of
renewable energy consumption on CO2 emissions gradually increases, which is also confirmed by the
works of Dong, Sun, and Dong (2018) and Dong, Sun, Jiang, et al. (2018).

7 | CO NC LUSION A N D P O L IC Y IM PLICATIONS

By employing a balanced panel data set for 120 countries covering 1995–2015, this study aims to in-
vestigate the role of renewable energy consumption in CO2 emissions across the globe. To empirically
investigate whether the role of renewable energy consumption in CO2 emissions differs across coun-
tries with different income levels, the 120 countries are classified into four income-based subpanels:
HI, UMI, LMI and LI. Considering the cross-sectional dependence and slope heterogeneity that may
exist within countries, a series of econometric techniques allowing for cross-sectional dependence and
slope heterogeneity is utilised in this study.
1690
|    DONG et al.

Several interesting findings are highlighted, as follows:

1. Cross-sectional dependence and slope heterogeneity are confirmed for the global panel as
well as for all four subpanels.
2. Only for the global panel and two relatively high-income subpanels (i.e., the HI and UMI sub-
panels) is the EKC hypothesis valid; the TP of the EKC is calculated as $16,031.2, $38,243.3 and
$11,439.5, respectively. Additionally, the EKC in the HI subpanel reached its TP before 2015;
conversely, for the global panel and UMI subpanel, the EKCs are expected to reach the peaks in
approximately 2043 and 2025, respectively.
3. Renewable energy consumption has a negative effect on CO2 emissions for the global panel as well
as for all four subpanels. However, this effect is not significant, which may be because the mitiga-
tion effect of renewable energy consumption on CO2 emissions is obscured by higher economic
growth and increasing non-renewable energy consumption.
4. The global panel and four subpanels provide mixed directionality of causality among the variables.
Therefore, for various income-based subpanels, significant differences exist in the role of renew-
able energy consumption in CO2 emissions, especially highlighting in various direct and indirect
influencing paths between renewable energy consumption and CO2 emissions.

The above findings suggest important policy implications:

1. No EKC hypothesis exists in the countries with low income and pollution levels, such as
LMI and LI countries; however, these countries should still establish environmental policies
to maintain a low level of CO2 emissions with continuing growth of their economies. In
contrast, the countries in which EKC exists but has not reached the TP (e.g., the global panel
and UMI subpanel) should further develop a series of energy, economic and environmental
policies to alleviate the scale effect and accelerate reaching the turning point of EKC for
CO2 emissions. In addition, for the countries in which EKC exists and the TP has been
reached (e.g., the HI subpanel), more focus should be placed on total emissions or emission
intensity rather than per capita emissions.
2. Although the current level of renewable energy consumption is still low and its mitigation effect is
not significant, renewable energy consumption can reduce CO2 emissions and the mitigation effect
will gradually increase along with economic growth and a rising share of renewable energy con-
sumption. Consequently, every subpanel, regardless of whether it is low-income or high-income,
should implement a series of policies to increase the share of renewable energy and discourage the
use of non-renewable energy.
3. Considering the remarkable difference in influencing paths between renewable energy consump-
tion and CO2 emissions across various income-based subpanels, sufficient differentiation in emis-
sion-reduction policies should be developed by controlling the influencing paths. For example,
only for the UMI and LMI subpanels can the CO2 emissions be mitigated through controlling the
relationship between renewable energy consumption and the urbanisation level.

In future research, this can be extended by adding additional control variables, such as energy price, for-
eign direct investments and financial development. In addition, if the data can be obtained, it would be
interesting to consider many more countries. Last but not least, further investigation of the EKC hypothe-
sis by incorporating the cubic form of per capita GDP (i.e., GDP3) into the model offers another potential
research direction.
DONG et al.   
| 1691

ACKNOWLEDGEMENTS
The authors acknowledge financial support from the National Social Science Foundation of China
(Grant No. 18VDL017). The authors also thank the Editor and anonymous reviewer for helpful com-
ments. No potential conflict of interest was reported by the authors. The views expressed in this paper
are those of the authors, and all remaining errors are their own.

ORCID
Kangyin Dong https://orcid.org/0000-0002-5776-1498

DATA AVAILABILIT Y STATEMENT

The data that support the findings of this study are available from the corresponding author upon
reasonable request.

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How to cite this article: Dong K, Dong X, Jiang Q. How renewable energy consumption
lower global CO2 emissions? Evidence from countries with different income levels. World
Econ. 2020;43:1665–1698. https​://doi.org/10.1111/twec.12898​
DONG et al.   
| 1697

APPENDIX A

TABLE A1 List of countries based on income level

Subpanel
HI countries (42 countries)
UMI countries (39 countries)
LMI countries (29 countries)
LI countries (12 countries)
Note: Hong Kong, Macao and Taiwan in China are not considered due to data unavailability; the data on the country's two-letter ab-
breviation are from Patrias and Wendling (2007).
Countries
Argentina (AF), Australia (AU), Austria (AT), Belgium (BE), Canada
(CA), Chile (CL), Croatia (HR), Cyprus (CY), Czech Republic (CZ),
Denmark (DK), Estonia (EE), Finland (FI), France (FR), Germany (DE),
Greece (GR), Hungary (HU), Iceland (IS), Ireland (IE), Israel (IL),
Italy (IT), Japan (JP), Korea, Rep. (KR), Latvia (LV), Lithuania (LT),
Luxembourg (LU), Malta (MT), Netherlands (NL), New Zealand (NZ),
Norway (NO), Panama (PA), Poland (PL), Portugal (PT), Saudi Arabia
(SA), Singapore (SG), Slovakia (SK), Slovenia (SI), Spain (ES), Sweden
(SE), Switzerland (CH), United Kingdom (GB), United States (US) and
Uruguay (UY)
Albania (AL), Algeria (DZ), Armenia (AM), Azerbaijan (AZ), Belarus
(BY), Bosnia and Herzegovina (BA), Botswana (BW), Brazil (BR),
Bulgaria (BG), China (CN), Colombia (CO), Costa Rica (CR), Cuba
(CU), Dominican Republic (DO), Ecuador (EC), Gabon (GA), Guatemala
(GT), Iran (IR), Iraq (IQ), Jamaica (JM), Jordan (JO), Kazakhstan (KZ),
Lebanon (LB), Macedonia, FYR (MK), Malaysia (MY), Mauritius (MU),
Mexico (MX), Namibia (NA), Paraguay (PY), Peru (PE), Romania (RO),
Russian Federation (RU), South Africa (ZA), Thailand (TH), Turkey
(TR), Turkmenistan (TM) and Venezuela, RB (VE)
Bangladesh (BD), Bolivia (BO), Cambodia (KH), Cameroon (CM), Congo,
Rep. (CG), Egypt, Arab Rep. (EG), El Salvador (SV), Georgia (GE),
Ghana (GH), Honduras (HN), India (IN), Indonesia (ID), Ivory Coast
(CI), Kenya (KE), Kyrgyz Republic (KG), Moldova (MD), Mongolia
(MN), Morocco (MA), Nicaragua (NI), Nigeria (NG), Pakistan (PK),
Philippines (PH), Sri Lanka (LK), Sudan (SD), Tunisia (TN), Ukraine
(UA), Uzbekistan (UZ), Vietnam (VN) and Zambia (ZM)
Benin (BJ), Congo, Dem. Rep. (CD), Ethiopia (ET), Haiti (HT),
Mozambique (MZ), Nepal (NP), Senegal (SN), Tajikistan (TJ), Tanzania
(TZ), Togo (TG), Yemen, Rep. (YE) and Zimbabwe (ZW)
1698
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TABLE A2 List of abbreviations

Abbreviations
ADF Augmented Dickey–Fuller IEA International
Energy Agency
AMG Augmented mean group LI Low-income
ARDL Autoregressive distributed lag LM Lagrange multiplier
BP British Petroleum LMI Lower-middle-
income
CADF Cross-sectionally ADF MG Mean group
CCEMG Common correlated effects mean Mtoe Million tonnes oil
group equivalent
CIPS Cross-sectionally augmented Im, OECD Organisation
Pesaran and Shin for Economic
Cooperation and
Development
CO2 Carbon dioxide OLS Ordinary least
squares
D-H Dumitrescu–Hurlin RE Random effects
DOLS Dynamic OLS RMSE Root mean square
error
EKC Environmental Kuznets curve Toe Tonnes oil
equivalent
FE Fixed effects TP Turning point
FMOLS Fully modified OLS TY Turning year
GDP Gross domestic product UMI Upper-middle-
income
GNI Gross national income VECM Vector error correc-
tion model
HI High-income WDI World Development
Indicators