Exploring the impact of renewable energy on economic growth and carbon emissions: Evidence from partial least squares structural equation modeling

The concern for environmental sustainability comes along with sustainable energy for consumption. Therefore, this study aims to explore the direct and indirect effects of renewable energy on economic growth and carbon emissions by employing Partial Least Square Structure Equation Modeling and Granger Causality Test and the data for this study is from 1990 to 2021. The results from the Partial Least Squares Structure Equation Modeling indicate that renewable energy consumption causes carbon emissions and has no effect on economic growth. Financial inclusion and foreign direct investment have positive effects on carbon emissions. However, renewable energy has an indirect negative effect on carbon emissions through economic growth. Foreign direct investment affects economic growth positively. Furthermore, the results from the Granger causality test indicate that renewable energy has a unidirectional causality relationship with financial inclusion and foreign direct investment and has a feedback causality relationship with economic growth. In addition, there is a feedback causal effect between financial inclusion and carbon emissions, a unidirectional effect running from carbon emissions to foreign direct investment, and a causal effect from economic growth to foreign direct investment. This study has suggested comprehensive policy recommendations for policymakers based on the findings.