Deciphering the interconnections: a panel vector autoregressive analysis of economic growth, renewable energy use, trade openness and CO 2 emissions in OECD countries

This study investigates the impact of economic growth, renewable energy, and trade openness on CO2 emissions in OECD countries from 1995 to 2020, categorised by GDP growth into low (>1%), moderate (1%-3%), and high (>3%). Using panel vector autoregression models, it finds an inverse relationship between GDP and CO2 emissions in low-growth economies, and a positive correlation in moderate and high-growth economies. Renewable energy positively impacts CO2 emissions in moderate and high-growth economies but reduces them in low-growth contexts. The Hausmann test supports using a fixed effect model, and the Granger causality test reveals a unidirectional relationship from GDP and renewable energy to CO2 emissions across all growth levels. These discoveries highlight the connection between economic growth and carbon emissions, thus stressing the necessity for nations with advanced economic statuses to implement measures aimed at curbing carbon emissions through the promotion of renewable energy sources.