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The effect of clean energy investment on CO2 emissions: Insights from a Spatial Durbin Model

Author

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  • Weng, Chunfei
  • Huang, Jingong
  • Greenwood-Nimmo, Matthew

Abstract

We estimate the direct and indirect effects of clean energy investment on carbon emissions using a Spatial Durbin Model fitted to a panel of 72 countries from 2000 to 2018. We find that a 1 percent increase in domestic clean energy investment reduces domestic carbon emissions by approximately 0.05 percent on average, controlling for country characteristics. However, this benefit is offset by a carbon leakage effect, whereby a 1 percent increase in clean energy investment among neighboring countries leads to about a 0.28 percent increase in domestic carbon emissions. This is suggestive of the outsourcing of pollution from one country to another and indicates that ad hoc policies to promote clean energy investment may be ineffective in achieving global emissions abatement. We conclude that a coordinated international policy framework is required to prevent jurisdiction-shopping by polluters.

Suggested Citation

  • Weng, Chunfei & Huang, Jingong & Greenwood-Nimmo, Matthew, 2023. "The effect of clean energy investment on CO2 emissions: Insights from a Spatial Durbin Model," Energy Economics, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eneeco:v:126:y:2023:i:c:s014098832300498x
    DOI: 10.1016/j.eneco.2023.107000
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    More about this item

    Keywords

    Clean energy investment; CO2 emissions; Carbon leakage effect; Spatial Durbin model;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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