The role of carbon taxes, clean fuels, and renewable energy in promoting sustainable development: How green is nuclear energy?

Renewable energy sources are viewed as a promising solution for lowering global carbon emissions. A couple of long-term policy instruments are critical for providing synergy to green energy sources to achieve long-term sustained growth. The study aims to analyze the role of alternative and nuclear energy in reducing carbon damage in a panel of five selected island economies for 2001–2020. The results of panel quantile regression estimates show that access to clean fuel technologies decreases carbon damage with a range of −0.404% (at the 10th quantile) to −0.211 (at the 90th quantile). Further, alternative and nuclear energy decrease carbon damage more at the 40th quantile, i.e., −0.349%, and the lowest at the 70th quantile, i.e., −0.286%. Carbon pricing decreases carbon damage at the 30th and 40th quantiles with an elasticity estimate of −0.042% and −0.035%, respectively. In contrast, renewable energy sources increase carbon damage at a 70th quantile to 90th quantile distribution. Clean fuel technologies work with renewable energy sources to reduce carbon damage. The causality estimates show that carbon damage causes clean fuel technologies, carbon pricing, and renewable energy consumption. On the other hand, carbon pricing encourages clean fuel technologies and renewable energy. Clean fuel technologies Granger cause renewable energy across countries. The forecasting estimates suggest that nuclear power will likely reduce carbon damage with a variance shock of 5.539% over the next ten years. The study concludes that using alternative and nuclear energy is very important for reducing the cost of carbon emissions and making the islands' economies green and clean.