The idiosyncratic relationship between greenhouse gases and economic growth: the role of renewable energy sources in the case of European countries

The article investigates the peculiar relationship between environment, energy and growth in 30 European countries. The relationship between greenhouse gas emissions, at aggregate and disaggregate level, and income is analysed by considering renewable energy sources (RES). The estimation of a panel model and the use of instrumental variables reveal the presence of an inverted N-shaped relationship between pollution and income, reflecting countries’ heterogeneous development. While RES are found to dampen pollution, their impact weakens as per capita income increases, even though the turning points of this inverted N-shaped curve are found to shift to lower income levels when RES are taken into account. We argue that when the level of income is high, the response of the environment is idiosyncratic so that policies enhancing growth cannot be considered as a tool of environmental renaissance, since the effect of RES is not sufficient to counterbalance the increasing pollution deriving from high levels of income.