How causality impacts the renewable energy, carbon emissions, and economic growth nexus in the South Caucasus Countries?

Renewable energy is essential for boosting economic expansion and lowering carbon dioxide emission (CO2) to achieve carbon neutrality. This study’s objective is to investigate the relationship between the use of renewable energy, economic growth, and CO2 for South Caucasus Countries. For analysis purposes, time series methods were applied on the panel data. Second-generation unit root and cointegration tests were used to test the cross-sectional dependence. Afterward, panel causality and panel VAR techniques were performed to examine the relationship between the variables. Based on feedback hypothesis, results of our causality analysis revealed a bidirectional causality relationship between growth and renewable energy consumption. Moreover, we revealed unidirectional causality from CO2 to renewable energy and from growth to CO2 emission. We also found that the effect of a shock in renewable energy on growth is increasing, and on CO2, it is decreasing implying that renewable energy consumption will trigger growth and have a reducing effect on CO2 emissions. We portrayed significant workable implications for policymakers, regulation bodies, companies, stakeholders, and managers. Results from this study should be extrapolated with caution since their applicability is limited to the South Caucasus Countries. In addition, the research heavily depends on summaries, which may obscure regional differences. In the future, researchers may want to dig deeper into the data and examine the subtle effect of renewable energy policy nationally. Moreover, including socio-economic aspects and technical improvements in the research might give a more thorough picture of the dynamics at play. © The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2024.