The Asymmetric Impact of Energy’s Paradigm Transition on Environmental Degradation: a Macroeconomic Evidence from Latin American and the Caribbean Countries

Abstract

The main objective of this study is to identify the impact of the energy paradigm transition on the environmental degradation of eighteen Latin American and Caribbean (LAC) countries. To this end, a panel non-linear autoregressive distributed lag (PNARDL) in the form of an unrestricted error correction model (UECM) and a period from 1990 to 2019 were used. The empirical results indicated that the variable economic growth in both the short- and long-run have an increase of 0.6994 and 0.3192, respectively, and the variable public capital stock in the short-run has an increase of 0.0176 in CO2 emissions. However, the positive and negative asymmetry of the variable ratio of renewable energy in the short-and long-run has a decrease of −0.1320 (on positive variations) and −0.1131 (on negative variations) in the short run and −0.0364 (on positive variations) and −0.0783 (on negative variations) in the long run on CO2 emissions. The capacity of the ratio of renewable/fossil energy consumption to reduce environmental degradation is compatible with the renewable energy technological efficiency that produces more clean energy and fewer emissions. That was also in line with the increasing participation of renewable energy sources in the energy matrix in the LAC countries.