Achieving Ecological Sustainability in European Countries: Does Low Carbon Energy Lead to a Carbon Neutrality Pathway

Abstract

The European Union (EU) recently intensified its focus on Sustainable Development Goals (SDGs) to achieve its net-zero emissions target. Thus, climate action and access to clean energy have become prominent research topics. Previous studies have predominantly explored the individual impacts of nuclear and renewable energy on EU economies within the environmental Kuznets curve (EKC) hypothesis. Departing from this conventional approach, the present study examines the effect of low-carbon energy consumption (LEC) on environmental quality while controlling for ecological influences of natural resource rents (NAT) and foreign direct investment (FDI). The study adopts the CS-ARDL approach to analyze annual data from 1996 to 2022. This analysis is framed within a novel framework: the load capacity curve (LCC) hypothesis. The empirical assessment reveals the following findings: i) The LCC hypothesis is validated for EU economies, indicating that these countries are on a path towards achieving their net-zero emissions target. ii) LEC positively impacts the ecosystem. iii) FDI and NAT are found to degrade environmental quality. Given these findings, EU economies should continue to increase their LEC within the total energy mix. Environmental sustainability can be further supported by implementing green policies aimed at regulating NAT and FDI. In conclusion, this study offers policies that will put the EU on the zero-emission path within the framework of SDGs. © 2024 Elsevier B.V.