On the Impact of GDP per Capita, Carbon Intensity and Innovation for Renewable Energy Consumption: Worldwide Evidence

The mitigation of climate change through ambitious greenhouse gases emission reduction targets constitutes a current priority at world level, reflected in international, regional and national agendas. Within the common framework for global climate action, an increased reliance on renewable energy sources, which would assist countries to reduce energy imports and cut fossil fuel use, emerged as the solution towards achieving worldwide energy security and sustainability through carbon-neutrality. As such, this study is aimed to investigate the heterogeneous effects of relevant economic and environmental driving factors for renewable energy consumption (REC) that emerge from current policy objectives (GDP per capita, carbon intensity, and research and development) through an empirical analysis of a wide panel of 94 countries, and five income-based subpanels, over the 1995-2019 period, by using heterogeneous panel data fixed-effects estimation techniques (static and dynamic) with robust Driscoll-Kraay standard errors. The results unambiguously indicate that CO2 intensity has a significant mitigating effect on REC at world level, and this relationship is stronger for low-income and very high-income countries. Moreover, GDP per capita promotes REC when it surpasses the 5000 USD threshold, whereas research and development is a major contributor to increase in renewable energy consumption in very high-income countries. As such, for the policy makers, it is necessary to consider the heterogeneity of the drivers of REC in order to issue effective and congruent policies. The effective employment of post-COVID-19 recovery funds constitutes a timely, ideal occasion.