Electricity generation from fossil fuels and environmental sustainability in Romania: investigating the influence of renewable energy, financial development and urbanization

The primary objective of this study was to elucidate the interactions among trade, renewable energy utilization, financial development, electricity generation from fossil fuels, urbanization and CO2 emissions in Romania, using annual data from 1990 to 2022. The research employed the symmetric Autoregressive Distributed Lag (ARDL) procedure to investigate the interactions between these variables, estimating both short- and long-term effects. The resilience of the series was assessed through the Generalized Method of Moments (GMM) and cointegration regression analysis. The findings demonstrate that trade and renewable energy utilization exert a negative influence on CO2 emissions, whereas financial development, electricity generation from fossil fuels and urbanization exert a positive impact on CO2 emissions. Furthermore, the analysis utilizing the GMM method and various cointegration regression techniques (FMOLS, DOLS and CCR) revealed that trade and renewable energy utilization negatively correlated with environmental degradation. Conversely, financial development, electricity generation from fossil fuels and urbanization were positively associated with CO2 emissions. The Romanian government must adopt new conservative strategies to combat environmental degradation by offering financial support for green energy initiatives. Furthermore, to encourage private sector efforts to reduce emissions, the policy framework should include reforms in institutions, public spending, legislative changes and budgetary support.