Renewable energy and CO2 emissions in G7 countries: does the level of expenditure on green energy technologies matter?

Promoting green energy is generally considered a crucial way to mitigate energy-related CO 2 emissions. However, the level at which a country’s expenditure on green energy technologies interacts with renewable energy consumption to save the planet has been ignored in the literature. Within the context of the Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model, this study investigates the interaction effect of renewable energy and expenditure on green energy technologies in mitigating CO 2 emissions in G7 countries over the period 1990–2017. The empirical results based on the Method of Moments-Quantile Regression (MM-QR) with fixed effects suggest that renewable energy and expenditure on green energy technologies have a negative and heterogeneous effect on CO 2 emissions. The interaction term has a stronger negative and heterogeneous effect across quantiles distribution of CO 2 emissions. This suggests that the extent to which renewable energy exerts downward pressure on CO 2 emissions is dependent on countries’ expenditures on green energy technologies. In addition, the effect of the interaction term is stronger in countries with lower levels of CO 2 emissions. Given these findings, the study suggests the need to promote investment in green energy technologies as a catalytic converter to mitigate CO 2 emissions.