NAVIGATING UNCERTAINTY: HOW ECONOMIC POLICY UNCERTAINTY SHAPES THE IMPACT OF GROWTH AND RENEWABLE ENERGY ON CO2 EMISSIONS

Abstract

This study examines the relationship between economic growth, renewable energy consumption, and CO2 emissions, while investigating the moderating role of Economic Policy Uncertainty (EPU) across 30 provinces in China from 2009 to 2020. Using the PCSE and FGLS estimators, the research found a positive and significant impact of both renewable energy and economic growth on CO2 emissions, indicating that despite the shift towards greener energy sources, rapid economic activity and the expansion renewable infrastructure may still contribute to environmental degradation. Notably, the results highlight a negative and significant moderating effect of EPU on the relationship between both renewable energy and economic growth with CO2 emissions. This suggests that heightened policy uncertainty weakens the direct impact of economic and energy variables on environmental outcomes, likely by disrupting investment flow delaying clean energy projects, or increasing risk aversion in green transitions. The study offers nuanced insights into the dynamic environmental effects of macroeconomic and policy factors in a rapidly developing economy, underscores the importance of policy stability in achieving effective environmental governance.