RENEWABLE ENERGY ADOPTION, CARBON EMISSIONS AND ECONOMIC GROWTH: PANEL EVIDENCE FROM WESTERN BALKAN AND DEVELOPED EUROPEAN ECONOMIES
Abstract: This study aims to examine the adaptive relationships among sustainable energy adoption, carbon-intensive emissions, and growth in economic output across eight European economies Croatia, Slovenia, Serbia, Bosnia and Herzegovina, Montenegro, North Macedonia, Germany, and Austria over the period 1990–2023, yielding 272 panel observations. The study applies a comprehensive panel econometric framework comprising LLC, IPS, Augmented Dickey-Fuller and Phillips-Perron Fisher unit root tests, Pedroni and Kao cointegration tests, the Pooled Mean Group estimator among the Panel ARDL framework, robustness checks through FMOLS and DOLS and the Dumitrescu- Hurlin panel causality test. Findings confirm that all variables are related in order and long run interconnected. PMG estimation reveals that renewable energy adoption positively and plays the important role in economic growth with an elasticity of 0.312, while carbon emissions exert a negative long-run effect on GDP. The inverted U Environmental Kuznets Curve hypothesis is linked with the validity of the panel, with an estimated revenue with the turning point of approximately USD 25,840 per capita. Causality analysis confirms a bidirectional relationship between sustainable energy and GDP growth and a unidirectional causal effect of sustainable energy on emissions reduction. The findings revealed that renewable energy investment represents a viable dual strategy for simultaneously promoting economic growth and reducing carbon emissions across both developing Western Balkan and developed European economies, with important implications for regional energy transition policy and EU accession frameworks.
Keywords: Sustainable energy, Economic growth, Carbon emissions, Environmental Kuznets Curve, Panel ARDL