The Role of Moderating Factors in the Nexus Natural Resource Rents and Renewable Energy Adoption among European Countries

Abstract

This paper examines the intermediary role of carbon dioxide emissions and GDP per capita in the relationship between natural resource rents and renewable energy in European countries, specifically distinguishing between renewable energy consumption and production. Specifically, the paper aims to identify the carbon dioxide emissions and GDP per capita thresholds at which the impact of natural resource or petroleum rents on renewable energy adoption shifts in direction. Utilising the panel autoregressive distributed lag (ARDL) methodology, particularly the Pooled Mean Group (PMG) estimator, the paper demonstrates that natural resource and petroleum rents can promote both the consumption and production of renewable energy once GDP per capita surpasses a specific threshold which varies between renewable energy consumption and production. Furthermore, the study finds that an increase in natural resource rents reduces renewable energy consumption and production when CO2 emissions exceed a certain threshold. These findings are particularly relevant for European countries, which are at the forefront of international climate agreements, such as the Paris Agreement, and align with the objectives of Sustainable Development Goal 13 (SDG 13) on climate action.