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The double sustainability: The link between government debt and renewable energy

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  • Auteri, Monica
  • Mele, Marco
  • Ruble, Isabella
  • Magazzino, Cosimo

Abstract

This paper innovatively explores the relationship between a country’s government debt and the use of renewable energy. Incorporating key socio-economic and financial variables, critical to the United Nations SDG-7, we build a panel dataset for G7 countries from 1990-2021. Using cointegrating regression methods (FMOLS and DOLS), Quantile Regressions (QR) and pairwise panel causality tests, we find bidirectional causality between government debt and renewable energy consumption (REC). The empirical findings emphasize the important policy implications for sustainable economic development. Escalating government debt can hinder investment in renewable energy infrastructure, while increased renewable energy has a positive impact on government debt dynamics. Policymakers are encouraged to prioritize fiscal responsibility to secure resources for renewable energy investments. Moreover, incentivizing renewable energy deployment promotes long-term fiscal benefits and creates a positive feedback loop. In fact, a comprehensive understanding of the relationship between government finances and environmental sustainability is crucial for an optimal balance.

Suggested Citation

  • Auteri, Monica & Mele, Marco & Ruble, Isabella & Magazzino, Cosimo, 2024. "The double sustainability: The link between government debt and renewable energy," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    • Handle: RePEc:eee:joecas:v:29:y:2024:i:c:s1703494924000057
    DOI: 10.1016/j.jeca.2024.e00356
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    More about this item

    Keywords

    Government debt; Renewable energy consumption; Environmental Kuznets curve; Panel data; G7 countries;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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