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Renewable energy consumption, good governance system, economic growth, and FDI: The pathway towards environmental quality in European countries

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  • Gyimah, Justice
  • Han, Yunfei
  • Yao, Xilong

Abstract

Climate change, a challenge to global sustainability, aggravated by the continuous reliance on high emissions technologies to achieve high production and growth remain unceasingly to receive attention as the agenda towards environmental sustainability is yet to be accomplished. Therefore, transitioning to a sustainable environment requires strategies that address governance systems, growth level, and energy use. The current study investigates the effect of renewable energy consumption, good governance system, economic growth, and foreign direct investment on environmental sustainability in Europe from 2002 to 2021 using the Pooled Mean Group Autoregressive Distributed Lag (PMG ARDL), Structural Equation Modeling (SEM), and Generalized Method of Moments (GMM) methods. The findings of the study are; first, renewable energy consumption is needful for transitioning to a sustainable environment as it significantly reduces carbon emissions. Second, good governance system worsens environmental sustainability as it positively and significantly affects carbon emissions. Third, the pollution halo hypothesis is confirmed as FDI negatively and significantly influences carbon emissions, while trade openness deteriorates environmental quality. Fourth, economic growth and population growth have no ameliorating impact on carbon emissions. The SEM analysis found a significant negative indirect effect of renewable energy consumption on carbon emissions and a significant positive indirect effect of good governance system on carbon emissions. The findings encourage governance and institutional reforms.

Suggested Citation

  • Gyimah, Justice & Han, Yunfei & Yao, Xilong, 2025. "Renewable energy consumption, good governance system, economic growth, and FDI: The pathway towards environmental quality in European countries," Energy, Elsevier, vol. 337(C).
    • Handle: RePEc:eee:energy:v:337:y:2025:i:c:s0360544225043506
    DOI: 10.1016/j.energy.2025.138708
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