Advancing Sustainable Development in Central and Eastern Europe: The Interplay of Environment, Energy, and Economy

Renewable energy is of central importance for global sustainable development. While the interaction between conventional energy sources and pollutant emissions in developing countries has already been extensively researched, there is still considerable research potential regarding the impact of electricity generated from renewable sources on development. The Central and Eastern European (CEE) countries are characterized by a strong dependence on energy-intensive industrial processes, for which they have to ensure a stable and cost-effective energy supply. The future of a cost-efficient energy supply depends on the integration of renewables into the energy mix. The main objective of this paper is to investigate and quantify the complex relationship between CO2 emissions and electricity generated from renewables in 15 CEE countries from 1995 to 2021. Therefore, the model used in this paper establishes a comprehensive relationship between CO2 emissions and renewable electricity generation, considering other relevant variables such as final electricity consumption growth, GDP per capita growth, inflation rate, human development index, and trade openness. The empirical model was then estimated using various panel methods tailored to the specific data characteristics in order to obtain precise and consistent results. These methods include Fixed Effects, Generalized Least Squares, Panel-Corrected Standard Errors, Arellano Bond, and System Generalized Method of Moments. The results support the relationship between CO2 emissions growth rates and electricity generated from renewables. The results show that a 1 percentage point increase in electricity generated from renewables growth reduces CO2 emissions in CEE countries in a range of 0.07 to 0.11 percentage points. The model also shows that a 1 percentage point increase in growth of final electricity consumption accelerates growth of CO2 emissions by approximately 0.51 percentage points. Furthermore, a 1 percentage point increase in GDP per capita growth corresponds to a significant increase in growth of CO2 emissions, ranging from 0.48 to 0.73 percentage points. In addition, a 1 percentage point increase in the inflation rate is associated with a small but statistically significant increase in CO2 emissions of about 0.0002 percentage points. The human development index and trade openness are not statistically significant. The research results underline the positive impact of increasing renewable electricity generation on green development in CEE countries, which is crucial for reducing carbon emissions in the region. Despite the potential for increased use of renewable energy in CEE economies, they face technical, economic, and social challenges in generating electricity from renewables. Therefore, public policies need to incentivize investment in renewable energy projects. The implementation of appropriate policy measures and institutional frameworks, such as public–private partnerships and fiscal incentives, is crucial to promote greater use and production of renewable energy in these countries and to drive the modernization of the power sector.