The relationship between CO₂ emissions, renewable and non-renewable energy consumption, economic growth, and urbanisation in the Southern Common Market

ABSTRACT

The causalities between carbon dioxide emissions, renewable and non-renewable energy consumption, economic growth, and urbanisation were examined for the panel of five countries (Argentina, Brazil, Paraguay, Uruguay, and Venezuela) from Southern Common Market, over thirty-five years (1980–2014), using a panel vector autoregression. The empirical analysis pointed to the existence of bi-directional causality between the consumption of fossil fuels, economic growth, consumption of renewable energy, and carbon dioxide emissions; and a uni-directional relationship between the consumption of renewable energy and urbanisation. The research also proves that the countries from Southern Common Market are dependent on fossil fuels consumption and that urbanisation process is highly linked with the consumption of this type of energy. Additionally, it was found that these countries have low renewable energy participation in their energy mix. Nevertheless, a substitutability effect between the consumption of renewable energy and the consumption of fossil fuels, as a possible response to periods of scarcity in reservoirs, was detected. Policymakers of Southern Common Market countries should speed up the deep reforms regarding renewable energy to mitigate environmental degradation.

KEYWORDS:

• Energy economics
• environmental economics
• economic growth
• urbanisation
• PVAR
• Mercosur

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This study was funded by National Funds of the FCT – Portuguese Foundation for Science and Technology through CEFAGE, R&D unit, project UID/ECO/04007/2019; and NECE - Research Unit in Business Science and Economics, project UID/GES/04630/2019; Fundação para a Ciência e a Tecnologia.